Court Opinion

ID: 771286
Source: CourtListenerOpinion
Date Created: 2012-04-18 10:48:52+00
Date Added: 2024-06-11T15:17:39.070915
License: Public Domain

233 F.3d 1005 (7th Cir. 2000)
United States of America, Plaintiff-Appellee,v.Richard Pergler, Defendant-Appellant.
No. 99-3879
In the  United States Court of Appeals  For the Seventh Circuit
Argued September 11, 2000Decided December 4, 2000

Appeal from the United States District Court  for the Northern District of Illinois, Eastern Division.  No. 98 CR 469--Harry D. Leinenweber, Judge.[Copyrighted Material Omitted]
Before Bauer, Evans, and Williams, Circuit Judges.
Bauer, Circuit Judge.

1
Richard Pergler was  convicted of mail fraud, money laundering, and  submitting false claims in connection with a  scheme to fraudulently bill Medicare for  incontinence products. Before his indictment,  Pergler employed attorney Paul DeMuro of Latham  & Watkins to counsel him regarding Medicare  coverage for some of the products he sold. After  his indictment, Pergler employed two other Latham  & Watkins attorneys, Herve Gouraige and Michael  Leib, to defend him. In this direct appeal,  Pergler contends that his trial counsel was  forced to choose between vigorously representing  him and protecting their colleague, DeMuro. This  conflict of interest, Pergler argues, caused  Gouraige and Leib to violate his Sixth Amendment  right to effective assistance of counsel. Pergler  urges us to vacate his convictions and remand the  case for a new trial. We decline to do so.

I.  Background

2
Pergler was convicted of selling non-  reimbursable adult incontinence products, notably  adult diapers and "fempouches" to Medicare  patients, and fraudulently billing the products  to Medicare. Medicare assigns products to an HPPC  code group, which, among other things, indicates  whether the product may be billed to Medicare.  Adult diapers are assigned to a non-billable  code, A4554. Pergler, however, billed "belted  undergarments" and "briefs" to Medicare under  billable code A4328, arguing that their status  fell into a gray area.

3
In 1994, Pergler became aware of the fempouch,  a diaper-like incontinence product with an insert  to collect urine samples. At the time Pergler  began selling the fempouch, it was a new product  with an undetermined billing status. The inventor  of the fempouch informed Pergler that his  attorney, Joy Thomas, was working to determine  the billing status of the product. Pergler  retained Paul DeMuro, a Latham & Watkins attorney  from California, to advise him about billing the  fempouch to Medicare. DeMuro, with Thomas and  Medicare expert Ron Nicholson, participated in  two conference calls regarding the billable  status of the fempouch. Nicholson opined that the  fempouch was billable to Medicare, but urged  Pergler to seek a final determination of its  billable status from Medicare. Pergler billed the  fempouch to Medicare before receiving a final  determination.

4
In October of 1994, the government investigated  and indicted Pergler for Medicare fraud. After  Pergler's indictment, he retained Herve Gouraige  and Michael Leib, both of Latham & Watkins, as  defense counsel. One week before trial, Gouraige  and Leib informed the government that they  intended to mount a good faith defense. In  support, they planned to call Thomas, counsel to  the fempouch manufacturer, and question her about  the two conference calls.

5
The government was concerned that Thomas'  testimony could create a potential conflict of  interest for Pergler's attorneys. Specifically,  the government theorized that Pergler relied on  Thomas' advice of counsel. The government feared  that if the defense elicited Thomas' testimony  about the conference calls, it would thereby  waive Pergler's attorney-client privilege with  DeMuro. If the government then called DeMuro as  a witness, the defense attorneys would be in a  conflict of interest position when they cross  examined DeMuro.

6
The day before trial, the government filed a  memorandum raising these attorney-client  privilege and conflict of interest issues. The  government sought to determine whether Thomas'  testimony about the two conference calls would  destroy Pergler's attorney-client privilege with  DeMuro. The district court ruled that Thomas'  proposed testimony would not waive Pergler's  attorney-client privilege with DeMuro because the  calls were not confidential, and thus were not  subject to the privilege.

7
After the court's ruling, the government asked  that Pergler waive his potential advice-of-  counsel defense. Attorney Gouraige indicated to  the court that he had counseled Pergler about the  waiver and that Pergler waived his advice-of-  counsel defense. The court engaged in a colloquy  with Pergler during which it briefly explained  the potential conflict of interest and confirmed  that Pergler indeed wanted to waive his advice-  of-counsel defense.

8
The government then requested that the court  appoint independent counsel to advise Pergler of  his rights. Again, in a brief colloquy with the  court, Pergler indicated that he was aware of his  right to discuss the waiver with independent  counsel. Pergler, however, declined the court's  offer to allow him time to consult with another  attorney.

9
At trial, Pergler's counsel called only one  witness on Pergler's behalf, the fempouch  manufacturer. The defense did not call Thomas or  DeMuro. Pergler alleges that his attorneys'  failure to call these witnesses stemmed from  their conflict of interest. Further, Pergler  argues that the conflict of interest forced the  defense to truncate its cross-examination of  Nicholson.

10
Pergler, with new counsel, filed a direct  appeal claiming that his Latham & Watkins defense  team denied him effective assistance of counsel  as a direct result of their conflict of interest.  Pergler chose not to use 28 U.S.C. sec. 2255 to  bring his ineffective assistance of counsel  claim; therefore, we do not have the benefit of  a developed factual record.

II.  Discussion

11
Pergler argues that the district court violated  his Sixth Amendment right to effective assistance  of counsel because it allowed Gouraige and Leib  to defend him despite an actual or potential  conflict of interest. The defendant bears the  burden of proof for an ineffective assistance of  counsel claim because we adopt a strong  presumption that counsel was effective. See  United States v. Herrera-Rivera, 25 F.3d 491, 495  (7th Cir. 1994) (citing Strickland v. Washington,  466 U.S. 668, 690 (1984)).

12
To prevail, Pergler must prove that (1) his  counsel's performance was deficient and (2) the  failure to provide adequate representation  prejudiced his defense. See Cabello v. United  States, 188 F.3d 871, 875 (citing Strickland, 466  U.S. at 687). However, when, as here, the claim  is based on a conflict of interest, the defendant  can satisfy the prejudice element by proving  either that his counsel (1) labored under an  actual conflict of interest, see Strickland, 466  U.S. at 692, or (2) was subject to a potential  conflict of interest which the court was or  should have been aware of, and which it failed to  address adequately, see United States v. Fish, 34  F.3d 488, 492 (7th Cir. 1994) (citing Holloway v.  Arkansas, 435 U.S. 475, 484-91 (1978)). We review  ineffective assistance of counsel claims de novo.  See Cabello, 188 F.3d at 875 (citing Spreitzer v.  Peters, 114 F.3d 1435, 1450 (7th Cir. 1997)).

A.  Conflict of Interest

13
We are generally reluctant to hear ineffective  assistance of counsel claims on direct appeal  because most trial records, unsupplemented by a  28 U.S.C. sec. 2255 hearing, lack the evidence  necessary to fashion a successful claim. See  Fish, 34 F.3d at 491 n.1. In his arguments,  Pergler implies that a conflict of interest  existed because he received advice from a Latham  & Watkins attorney while he was perpetrating  Medicare fraud, and hired other Latham & Watkins  counsel to defend him from the fraud charges. The  fact that both sets of attorneys work for the  same firm is not conclusive. When reviewing  ineffective assistance of counsel claims, we  presume that the attorneys made reasonable  judgments and decline to second guess strategic  choices. See United States v. Shukri, 207 F.3d  412, 418 (7th Cir. 2000). Pergler simply fails to  provide enough proof of a conflict to overcome  our presumption.

1)  Actual Conflict of Interest

14
Pergler claims that his defense team labored  under an actual conflict of interest. An actual  conflict of interest exists when "the defense  attorney was required to make a choice advancing  his own interests to the detriment of his  client's interests." United States v. Horton, 845  F.2d 1414, 1419 (7th Cir. 1988) (citations  omitted). Pergler contends that the government  admitted an actual conflict of interest when it  brought the issue of Thomas' proposed testimony  to the attention of the district court. It is  clear from the record that the government  admitted no such actual conflict. The government  merely argued that a conflict of interest problem  could arise if Thomas' testimony abrogated  Pergler's attorney-client privilege with DeMuro  and if DeMuro were subject to cross-examination  by Pergler's defense team. (Gov't Mem. Concerning  Waiver of Attorney-Client Privilege, 1-2).

15
Further, Pergler failed to show that an actual  conflict existed. The district court's response  to the government's memorandum precluded an  actual conflict in this case. The court ruled  that the conference calls, the subject of Thomas'  proposed testimony, were not covered by the  attorney-client privilege. Therefore, testimony  about them would not waive Pergler's attorney-  client privilege with DeMuro, and Pergler's  defense team could freely question Thomas about  the conference calls without creating any  conflict of interest. This evidentiary ruling  eliminated the possibility that an actual  conflict existed regarding Thomas' proposed  testimony.

2)  Potential Conflict of Interest

16
Pergler briefly argues that Thomas' proposed  testimony caused a potential conflict of  interest. The defendant's burden of proof for  potential conflict of interest claims differs  depending on whether the conflict of interest was  brought to the judge's attention. If an attorney  brought the potential conflict of interest to the  attention of the court, or the court knew or  reasonably should have known about the conflict,  we will assume prejudice when the judge fails to  address the conflict adequately. See Cabello, 188  F.3d at 875 (citing Holloway, 435 U.S. 475, 484-  91 (1978); Fish, 34 U.S. at 492). If the trial  judge did not have notice of the potential  conflict, the defense must prove that his counsel  actively represented conflicting interests and  that it prejudiced his case. See id. (citing  Cuyler, 446 U.S. 335, 350 (1979); Fish, 34 F.3d  at 492).

17
In this case, the judge had notice of the  potential conflict of interest addressed in the  government's memorandum: that Thomas' proposed  testimony about the conference calls could lead  to a conflict of interest situation. We believe  that the district court adequately addressed the  potential conflict created by Thomas' proposed  testimony. As explained above, the judge's  evidentiary ruling alleviated the potential  conflict. Further, the judge investigated and  learned that Pergler's attorneys did not plan to  call DeMuro to the stand. Given this information,  the district court rightly concluded that the  risk of potential conflict had been nullified,  and allowed the proceeding to continue. Pergler  has not shown that an actual or mishandled  potential conflict of interest existed.

B.  Deficient Performance and Prejudice

18
Pergler next argues that three of his defense  team's decisions show deficient lawyering and  prejudiced his defense: (1) deciding not to call  DeMuro to provide an advice-of-counsel defense or  general testimony; (2) choosing not to call  Thomas as a witness; and (3) conducting a brief  cross-examination of Nicholson. When evaluating  an attorney's performance, we presume that her  conduct "falls within the wide range of  reasonable professional assistance; that is, the  defendant must overcome the presumption that,  under the circumstances, the challenged action  'might be considered sound trial strategy.'"  Foster v. Schomig, 223 F.3d 626, 631 (7th Cir.  2000) (quoting Strickland, 466 U.S. at 689); see  Horton, 845 F.2d at 1419 (citations omitted).  Pergler fails to overcome the presumption. He  does not provide any evidence from the record  showing that Gouraige and Leib failed to pursue  a legitimate trial strategy by declining to call  Thomas and DeMuro as witnesses. Gouraige and Leib  may have concluded that Thomas' and DeMuro's  testimony would hurt Pergler. These two potential  witnesses may have testified that Pergler ignored  their advice, declined to resolve the billing  issues before submitting claims to Medicare or  knowingly defrauded Medicare. Pergler fails to  overcome our presumption that his trial counsel  followed a sound strategy.

19
As to the cross-examination of Medicare expert  Nicholson, Pergler argues that an exchange  between his trial counsel and the court proves  that his attorneys tailored their representation  to respond to a conflict of interest and that  their actions hurt Pergler's defense. During the  government's direct examination, Nicholson  testified that he believed that DeMuro took his  advice more seriously than Pergler and the other  conference call participants. Pergler's counsel  asked the court to strike this part of  Nicholson's testimony. They argued that their  cross-examination of Nicholson on this point  might require them to call DeMuro to testify  about the conference call. The court refused to  strike the testimony. Pergler's counsel concluded  Nicholson's cross-examination without asking  about the basis behind Nicholson's perception.

20
It is not at all clear that the defense team's  decision to truncate cross-examination  constituted deficient representation caused by a  conflict. First, it is unclear that Nicholson's  cross-examination would require the defense to  call DeMuro at all. There were three other  participants in the conference call besides  DeMuro and Nicholson, any of whom could have  testified. Second, it is not clear how the  claimed conflict of interest would have come into  play since the defense team would be questioning  Pergler on direct examination. Further, Pergler's  attorneys declined the court's offers to require  more of Nicholson. The court offered to strike  Nicholson's testimony if Nicholson had no  concrete basis for his opinion. It also offered  to have the government further explore the basis  for Nicholson's opinion. The defense took  advantage of neither option.

21
It is not clear from the record why Pergler's  trial counsel opted not to question Nicholson  about the basis for his opinion. It is clear,  however, that Pergler's counsel had several  options for proceeding that would not cause a  conflict of interest. We will not guess at  defense counsel's reasons for structuring  Nicholson's cross-examination as they did.1 The  evidence that Pergler marshals is not strong  enough to overcome our presumption that his  counsel acted adequately.

22
Even if we assume Gouraige and Leib acted  deficiently, Pergler fails to show that their  decision not to call DeMuro and Thomas and to cut  short Nicholson's cross-examination prejudiced  his case. To demonstrate prejudice, Pergler must  show that "there is a reasonable probability  that, but for counsel's unprofessional errors,  the result of the proceeding would have been  different." Strickland, 466 U.S. at 694. It is  insufficient for Pergler to show merely that "the  errors had some conceivable effect on the outcome  of the proceeding." Id. at 693. Pergler does not  offer any evidence that Thomas or DeMuro would  have provided exculpatory information or that  Nicholson's testimony was key to his conviction.  Pergler fails to demonstrate that his attorneys'  three decisions changed the outcome of his case.

III.  Conclusion

23
In the absence of a 28 U.S.C. sec. 2255 record  it is not our function to engage in speculation.  We AFFIRM the district court's decision.

Notes:

1
 Trial lawyers quickly learn that it is manifestly  unwise to ask cross-examination questions in two  situations: (1) when the answer will be damaging  (2) when the answer is unknown. We have no reason  to doubt that Pergler's attorneys were following  this sage lesson when they declined to question  Nicholson about the basis for his beliefs.

24
Williams, Circuit Judge, dissenting.

25
In my view,  the majority opinion mischaracterizes the claims  Richard Pergler raises in this appeal. With  respect to nearly all of Pergler's claims,  however, these mischaracterizations are harmless  because all but one of Pergler's claims are  without merit. But, with respect to Pergler's  claim that his trial attorneys rendered  constitutionally ineffective assistance of  counsel by restricting their cross-examination of  Ron Nicholson, I believe these  mischaracterizations lead the majority to reach  a conclusion that is erroneous.

26
Accordingly, I  dissent.

27
* * *

28
The majority opinion mischaracterizes Pergler's  claims in two ways. First, it treats all but one  of Pergler's claims as ordinary ineffective  assistance of counsel claims despite the fact  that both Pergler and the government view all of  Pergler's claims as conflict of interest claims  and each of Pergler's claims involves an  allegation that his trial attorneys did not  pursue an opportunity to bolster Pergler's  defense because of a conflict of interest.  Second, the majority opinion does not accurately  describe Pergler's precise claims on appeal--that  his trial lawyers labored under a conflict of  interest that caused them: (1) to refrain from  pursuing an advice of counsel defense; (2) to  truncate Ron Nicholson's cross-examination; (3)  to not call Joy Thomas to testify as to her  alleged belief that the Fempouch product was  reimbursable; and (4) to not call Paul DeMuro to  testify as to when Pergler sought guidance on the  legality of his actions.

29
Applying the special standards governing  conflict of interest claims to the four precise  claims Pergler raises requires an analysis very  different from the one employed in the majority  opinion. Before taking up Pergler's precise  claims, however, I should set out my  understanding of how this court reviews conflict  of interest claims. As the majority opinion  rightly notes, the standard of proof for a  defendant who claims that he or she received  ineffective assistance of counsel because his or  her attorney labored under a conflict of interest  depends on whether the conflict was brought to  the trial judge's attention. Cuyler v. Sullivan,  446 U.S. 335, 345-50 (1980); Holloway v.  Arkansas, 435 U.S. 475, 484-85 (1978). If the  trial judge was made aware of, otherwise knew of,  or reasonably should have known of a potential  conflict, the defendant need only establish that  the trial judge failed to adequately inquire into  the conflict (inadequate inquiry) and that the  conflict might have had an adverse effect on  counsel's performance (possible prejudice).  Spreitzer v. Peters, 114 F.3d 1435, 1450 (7th  Cir. 1997); United States v. Fish, 34 F.3d 488,  492 (7th Cir. 1994). If the trial judge was not  on notice regarding a potential conflict, the  defendant must establish that counsel actively  represented conflicting interests (actual  conflict of interest) and that the conflict  adversely affected counsel's performance (actual  prejudice). Spreitzer, 114 F.3d at 1450; Fish, 34  F.3d at 492.

30
Even properly characterized, Pergler's first,  third, and fourth claims are ultimately without  merit. As such, it is not necessary to  exhaustively analyze those claims. For  completeness sake, however, I will address them  briefly. Pergler's first claim--that his trial  attorneys did not pursue an advice of counsel  defense because of a conflict of interest--must  be judged under the inadequate inquiry/ possible  prejudice standard as there is no dispute that  the parties raised the possibility of such a  conflict of interest to the district court.  Pergler cannot satisfy this standard, however,  because the district court adequately inquired  into the conflict and obtained a valid waiver of  the conflict from Pergler. See, e.g., United  States v. Flores, 5 F.3d 1070, 1078-79 (7th Cir.  1993); United States v. Lowry, 971 F.2d 55, 59-64  (7th Cir. 1992). Pergler's third and fourth  claims--that his trial attorneys did not call Joy  Thomas or Paul DeMuro to provide certain  important evidence--do not involve conflicts that  were brought to the district court's attention  and, therefore, must be considered under the  actual conflict/actual prejudice standard. Under  this standard, Pergler's third and fourth claims  must fail because there is inadequate evidence in  the limited record available to determine whether  the alleged conflicts of interest adversely  affected the performance of Pergler's trial  attorneys; in particular, nothing in the record  establishes that an unconflicted attorney would  have called either Thomas or DeMuro. See, e.g.,  United States v. Cirrincione, 780 F.2d 620, 628-  31 (7th Cir. 1985).

31
Pergler's second claim has considerably more  merit than his other three claims. His second  claim arises out of the decision of his trial  attorneys to cut short their cross-examination of  Ron Nicholson. As the majority opinion notes,  Nicholson testified for the government that,  during a conference call regarding whether the  Fempouch product was reimbursable, Paul DeMuro  took more seriously than Pergler and the other  participants in the conference call Nicholson's  suggestion that the parties present the product  to Medicare authorities. Pergler's trial  attorneys wanted to rebut Nicholson's testimony,  but informed the district court that they felt  they could not do so because any questioning  about the basis for his statement "puts Latham &  Watkins in a difficult situation," and calling  DeMuro to provide rebuttal testimony could not be  done "without raising a serious disqualification  issue." Pergler's trial attorneys therefore stuck  with their request that the problematic portion  of Nicholson's testimony simply be struck, but  the district court refused. Pergler now claims  that his trial attorneys did not rebut  Nicholson's testimony because they labored under  a conflict of interest.

32
The first matter that must be addressed is the  government's argument, echoed in the majority  opinion, that the decision by Pergler's attorneys  to cut short their cross-examination of Nicholson  does not even present a potential conflict of  interest. The government and the majority opinion  suggest that Nicholson's testimony raises no  conflict of interest problem because: (1)  Pergler's attorneys were given the opportunity to  request that a foundation be laid for Nicholson's  testimony; (2) DeMuro would have been subject to  direct examination, not cross-examination, from  his colleagues; and (3) there were participants  in the conference call other than DeMuro who  could have testified. All of this is beside the  point, however. Regardless of how it was to be  accomplished, through further questioning of  Nicholson, direct testimony from DeMuro, or  testimony from other witnesses, Pergler's trial  attorneys were left, possibly, with the task of  establishing that their colleague was not  particularly concerned about presenting the  Fempouch product to Medicare authorities for a  reimbursability determination. In light of this  possibility, I can only conclude that a potential  conflict of interest did exist.

33
The next question, then, is whether the trial  court was on notice of this potential conflict.  It is clear that the court was, or at least  should have been. Pergler's attorneys all but  told the judge that because of their obligations  to Latham & Watkins they would not be pursuing a  possibly fruitful line of cross-examination. They  explained that any questioning about the basis  for Nicholson's testimony regarding the  seriousness with which DeMuro took Nicholson's  advice "puts Latham & Watkins in a difficult  situation." And, they asserted that calling  DeMuro to provide rebuttal testimony could not be  done "without raising a serious disqualification  issue." The district court clearly was on notice  that there might be a conflict of interest  problem related to the ability of Pergler's  attorneys to rebut Nicholson's testimony.

34
As the district court was on notice of this  potential conflict, the inadequate  inquiry/possible prejudice standard governs  Pergler's claim that his representation suffered  because of that conflict. Considering the  inadequate inquiry requirement first, the  question is whether the district court  sufficiently probed the potential conflict to  determine if there was a possibility that it  might ripen into an actual conflict or otherwise  took steps to address any possible conflict.  Fish, 34 F.3d at 492-94; United States v. Levy,  25 F.3d 146, 153 (2d Cir. 1994). The district  court conducted no inquiry whatsoever. Moreover,  the district court did not disqualify counsel or  obtain a waiver of the conflict from Pergler. Put  simply, the district court's inquiry into the  potential conflict of interest behind the  decision of Pergler's trial attorneys to cut  short their cross-examination of Nicholson was  inadequate.

35
As for whether this potential conflict of  interest created a possibility of prejudice, the  issue is whether the conflict might have had an  adverse effect on the performance of Pergler's  trial attorneys. Spreitzer, 114 F.3d at 1450;  United States v. Horton, 845 F.2d 1414, 1418 (7th  Cir. 1988). I think it might have. As noted  above, there is a quite plausible argument that  Pergler's trial attorneys did not pursue a more  extensive cross-examination of Nicholson because  of a conflict of interest. And, it is possible  that there is evidence indicating that DeMuro did  not take all that seriously Nicholson's advice  about presenting the Fempouch product to Medicare  authorities, which could have been used both to  undermine Nicholson's credibility and to bolster  Pergler's good faith defense. Accordingly, I  firmly believe that an unconflicted counsel would  have presented such evidence, assuming it was  available. As such, I can only conclude that  there does exist a possibility that prejudice  might have resulted from the conflict of interest  that allegedly caused Pergler's trial attorneys  to truncate Nicholson's cross-examination.

36
For the foregoing reasons, I believe Pergler  has established that his trial attorneys rendered  ineffective assistance of counsel. On that basis,  I would reverse his conviction.