United States v. Lachman

UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

No. 94-2005

UNITED STATES OF AMERICA,

Appellant,

v.

WALTER L. LACHMAN, MAURICE H. SUBILIA, JR.,
FIBER MATERIALS, INC., MATERIALS INTERNATIONAL,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Douglas P. Woodlock, U.S. District Judge]

Before

Selya, Boudin and Stahl,

Circuit Judges.

James D. Herbert, Assistant United States Attorney, with

whom Donald K. Stern, United States Attorney, and Despena Fillios

Billings, Assistant United States Attorney, were on brief for the

United States.
Nicholas C. Theodorou with whom Anthony Mirenda, Michael

Boudett, Foley, Hoag & Eliot, Bruce A. Singal and Ferriter,

Scobbo, Sikora, Singal, Caruso & Rodophele were on joint brief

for appellees.

February 23, 1995

BOUDIN, Circuit Judge. This is an interlocutory appeal

by the government under 18 U.S.C. 3731 contesting an

evidentiary ruling made prior to trial in a criminal case.

In the challenged ruling, the district court excluded from

the government's case-in-chief 13 exhibits that the

government deems of great importance. Finding that the

district court did not abuse the discretion it possesses

under Fed. R. Evid. 403, we affirm.

I.

On July 8, 1993, a grand jury returned an indictment

charging that four named defendants conspired to (count I),

and did in fact (count II), violate the Export Administration

Act of 1979 ("the Export Act"), 50 U.S.C. App. 2410(a), and

its implementing regulations. The defendants were two

corporations--Fiber Materials, Inc., and its subsidiary

Materials International--and the two top executive officers

of the companies: Walter L. Lachman and Maurice H. Subilia.

The "facts" that follow largely reflect the government's

allegations (as yet unproved).

Fiber Materials has been engaged for 25 years in the

production of composite materials for industrial and

aerospace applications. Most of its business relates to

technology for the manufacture of carbon/carbon, a category

of materials that can be made to withstand intense heat and

pressure. Over two-thirds of Fiber Materials' work is for

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the U.S. military. Materials International markets its

parent company's materials, technologies and services

overseas.

One of the technologies in which Fiber Materials is

expert relates to the hot isostatic press; the press is a

complex piece of industrial equipment that contains an

internal cavity and uses high pressure gas or liquid to

subject materials to intense pressure and a furnace to

produce extreme heat. Carbon/carbon, when "densified" by

this process, becomes suitable for use in rocket components,

including ballistic missiles with nuclear capability. Fiber

Materials generally subcontracts the manufacture of equipment

such as the press to others but provides the expertise.

In 1984, the Indian government's Defense Research and

Development Laboratory ("the Indian Defense Laboratory")

issued a request for proposals to outfit a carbon/carbon

facility in India for use in rocket and missile development.

Fiber Materials won the bid and in 1985 signed a contract

with the Defense Laboratory. Among other things, the

contract called for Fiber Materials to supply a hot isostatic

press with a cavity 26 inches in diameter, and a control

panel for the press; such a panel contains controls to heat,

pressurize and otherwise operate the press.

Under the Export Act, various goods and technologies are

subject to different levels of export control for reasons of

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foreign policy, national security or scarcity. As one facet

of this regime, the Commerce Department maintains a list of

commodities that may not be exported without an individual

license. Item ECCN 1312A on this list, as the list existed

in the late 1980s, covered hot isostatic presses with a

cavity diameter of 5 inches or more and any "components,

accessories and controls" that were "specially designed" for

such presses. Export to any country except Canada required a

license; and the stated reasons for the restriction were

"national security" and "nuclear non-proliferation." 15

C.F.R. 399.1, Supp. 1 (1988) (later revised and

renumbered).

In January 1987, Fiber Materials and the Indian Defense

Laboratory modified their contract to call for a hot

isostatic press with a cavity diameter of 4.9 inches and a

control panel for the press. According to the government,

Subilia wrote to the Indian Defense Laboratory to assure the

laboratory that the control panel to be supplied under the

new contract could in the future be used with a larger hot

isostatic press. In early 1987, the defendants were

allegedly told by the government that certain other items in

their contract, which required individual licenses, would

probably not be licensed because of security concerns.

In March 1988, Materials International entered into a

contract with the Indian Defense Laboratory to have a hot

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isostatic press with a cavity diameter of 26 inches made by a

third party in Switzerland (which did not prohibit such

exports) and shipped directly to India. A month later,

defendants exported the original 4.9 inch press, along with

its control panel, from the United States to India without

seeking or receiving a Commerce Department license. A year

and a half later, the 26 inch press was sent from Switzerland

to India. In 1991 and 1992, defendants sent employees of

Fiber Materials to India to install the equipment and,

specifically, to connect the U.S.-made control panel to the

large Swiss-made hot isostatic press.

On July 8, 1993, the four defendants were indicted in

two counts for knowingly conspiring to violate, and knowing

violation of, the Export Act and its regulations. 15 U.S.C.

App. 2410(a). The commodity whose export was claimed to be

unlawful was not the 4.9 inch press but the control panel.

II.

Pretrial proceedings were extensive. In June 1994, the

district court set trial to begin on July 25 and ordered the

government to provide a list of proposed exhibits to

defendants by July 1. On July 1, the government filed a very

lengthy list of exhibits. On July 19, the defendants filed a

motion in limine aimed at excluding many of these exhibits

relating to the alleged "end use" of the exported items for

missiles and nuclear weapons. The government then discarded

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many of its exhibits but opposed the exclusion of others

objected to by defendants. In the meantime trial was

deferred until August.

Perceiving that judgments about relevance might be

affected by the scienter instructions at trial, the district

court addressed that issue. With the government acquiescing,

the court ultimately adopted the defendants' theory of

intent: the court held that the "knowing[] violat[ion]"

requirement of 50 U.S.C. App. 2410(a) required the

government to prove that the defendants knew that the control

panel required an individual license. Compare United States

v. Gregg, 829 F.2d 1430, 1437 (8th Cir. 1987) (imposing such

a knowledge requirement) with United States v. Shetterly, 971

F.2d 67, 73 (7th Cir. 1992) (rejecting it). This issue is

not before us, and we express no view upon it.

The district court held a hearing on August 3 and, in an

oral ruling, excluded 13 of the governments' exhibits from

use in its case-in-chief. As to nine other exhibits, the

court declined to rule before the exhibits were offered at

trial, but it expressed "intense skepticism" about admitting

some of them. The government voluntarily withdrew 21 other

challenged exhibits. Although the excluded exhibits number

13, they actually comprise four different collections, one of

which accounts for 10 of the exhibits:

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The first (gov. ex. EK) is a 121-page file belonging to

the Institute for Defense Analysis, a U.S. industry working

group that assists the Defense Department with its own

program to identify militarily critical technologies. The

defendant Subilia was a member of the group. The 121-page

file contained records of working group meetings in 1985.

The records indicate that at one meeting Subilia attended,

carbon/carbon was discussed and a copy of ECCN 1312A was

distributed. The file contains many references to munitions

and weapons, and considerable material relating to

commodities not at issue in this case.

The second file of excluded documents (gov. exs. DW

through EF) consists of 10 newspaper clippings found in the

files of Materials International. These articles discuss the

Indian government's "AGNI" missile program. None refer to

hot isostatic presses or their control panels. All but one

of the articles are dated in 1989, more than a year after the

export of the control panel in this case. Each of the 10

newspaper articles was designated as a separate exhibit.

The third (gov. ex. AA1 through 5) is a group of

documents comprising defendants' registrations and renewal

applications filed with the State Department. That

department maintains its own "munitions" list of controlled

exports, a list distinct from that of the Commerce

Department. The State Department list does not cover hot

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isostatic presses or their control panels. The defendants'

filings with the State Department pertained to their

activities as exporters of carbon/carbon. The documents do

identify the U.S. military as customers of Fiber Materials.

The fourth (gov. ex. AE) is the Indian Defense

Laboratory's 1984 request for proposals for the carbon/carbon

processing facility. This was the proposal for which Fiber

Materials submitted the winning bid; as earlier noted, the

original arrangement for a larger hot isostatic press was

modified in 1987 to call for one of 4.9 inches. The exhibit

indicates that the Indian carbon/carbon facility would be

used in connection with rocket and missile development.

The district court's reasons for excluding these

exhibits have to be discerned from the transcript of the

hearing on August 3, a hearing that embraced issues and

documents in addition to the 13 exhibits now in dispute. In

excluding the 121-page file, the court referred to Rule 403

and called the materials duplicative, redundant and

potentially misleading. The State Department registration

papers were described more briefly in the same terms. In

excluding the 1984 request for proposals, the district court

called it "preliminary."

We think that a fair reading of the transcript as a

whole indicates that the trial court thought that some of the

material in the 13 exhibits was irrelevant and some of

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marginal relevance; that it saw in the references to missiles

and nuclear weapons a potential for jury prejudice; and that

it was concerned also, in the case of the 121-page document

and the State Department materials, with a problem of jury

confusion because of the references to materials other than

the press and controls at issue and references to regimes

other than the Commerce Department licensing controls.

At the same time, in the course of the hearing, the

district court told the defense that the government would be

given some latitude to present to the jury the defendants'

"familiarity with the regime of regulation" and "the

resistance that the Government may have to allowing awards of

licenses in an area of some sensitivity." This, said the

court, followed from the defendants' own success in making

knowledge of the legal restrictions an element of the

government's case. The court concluded by warning that "I

haven't finally ruled on this issue."

On August 5, the government asked the district court to

reconsider its exclusion of the 13 exhibits and the court

denied the motion. The government then announced that it

would appeal the court's ruling, and the trial scheduled to

begin three days later was continued indefinitely. A further

request by the government to the district court to reconsider

its ruling also failed. This appeal ensued.

III.

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Certain types of exclusionary rulings in criminal cases

are commonly made before trial, such as rulings on the

validity of a search and seizure or the voluntariness of a

confession. In most other cases, judges are hesitant to rule

finally on evidentiary questions in advance of trial. The

role and importance of the disputed evidence, its fit with

other evidence in the case, and even the precise nature of

the evidence may all be affected by, or at least more clearly

understood within, the context of the trial itself.

At the same time, determining the admissibility of a

piece of evidence may sometimes require a potentially lengthy

factual inquiry (e.g., whether a new class of scientific

evidence is admissible). Or the entire structure of the

case, and the parties' preparations, may turn on whether a

central piece of evidence is to be admitted. Thus, while

caution needs to be exercised, trial judges have discretion

to make purportedly final advance rulings to admit or exclude

evidence. We say "purportedly" because judges in ongoing

proceedings normally have some latitude to revisit their own

earlier rulings.

In this case, neither side disputes that the district

court was entitled to rule in limine on the 13 exhibits in

question. The only question is whether the court abused its

discretion under Rule 403 in determining that these exhibits

should be excluded. The government admits that the standard

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of appellate review as to such rulings is deferential to the

district court, but says that discretion is not unlimited.

It is certainly true that essentially legal issues may be

embedded in such a decision; and we agree that even the

exercise of discretionary judgment is subject to outer

limits. See United States v. Roberts, 978 F.2d 17, 21 (1st

Cir. 1992).

Rule 403 calls upon the district court to weigh the

probative value of evidence against the harms that it may

cause--unfair prejudice, confusion, misleading the jury,

delay or repetition--and to exclude the evidence if the

probative value is "substantially outweighed" by the harms.

The government does not argue that the trial judge misstated

Rule 403 or misunderstood the factors; rather, the claim is

that the court struck the wrong balance. One can start the

analysis at either end of the balance scale. In this case,

it is convenient to begin our discussion with the probative

value of the evidence in question.

Normally, in order to have probative value, evidence

must be "relevant" under Fed. R. Evid. P. 401, that is, it

must tend to make an issue in the case ("a fact of

consequence") more or less likely than would be so without

the evidence. United States v. Tavares, 21 F.3d 1, 5 (1st

Cir. 1994) (en banc). Other factors that may bear on

probative value are the importance of the issue and the force

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of the evidence. 22 C. Wright & K. Graham, Federal Practice

and Procedure 5214 (1978). In this case, the government's

most difficult problem throughout has been explaining why and

how the exhibits in question are relevant to an issue in the

case.

The core of the charges in the indictment are that the

defendants knowingly agreed to, and did in fact, export a

commodity that requires an individual license without

obtaining such a license. A commodity requires such a

license if it appears on the Commerce Department list of such

commodities. See 50 U.S.C. App. 2403(b), 24049(a); 15

C.F.R. 372.2(b)(1) (1988). The listed item in question--a

specially designed control panel--is described primarily in

terms of its relationship to another, technically described

item (a hot isostatic press with a cavity of 5 inches or

more). The end use of the products to be made by the control

panel and press is not an explicit element in the definition.

By contrast, the most prominent feature of the exhibits

in question--and the aspect most objected to by defendants--

is their tendency to show that the control panel might well

be used to foster the development of weaponry including

nuclear missiles. This is the gist of the 10 newspaper

clippings concerning the Indian government's AGNI missile

program. Military uses of the carbon/carbon materials

produced by the hot isostatic press are one subject of the

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121-page file. The State Department registration papers

serve to associate Fiber Materials with military projects.

The 1984 request for proposals suggest that the original

larger press was sought for missile development.

The government seeks to connect the offense with the

exhibits primarily by arguing that the evidence helps to show

scienter. The government here has acquiesced in a stringent,

and relatively rare, instruction that--to make out a

violation--the defendants must not only have known what they

did, but also have known that it was forbidden. Where the

offense is one grounded in technical regulations and the

conduct not inherently likely to be unlawful--the legal tag

is malum prohibitum--this burden will often be a heavy one

for the government.

Although the government's brief does not spell out the

connections systematically, we think that such a scienter

requirement might arguably make portions of the exhibits in

question relevant in several different ways. The broadest

utility would be to suggest that, knowing of the potential

military use of the press and the Indian government's

interest in such a use, the defendants had more reason in

prudence, and were therefore more likely in fact, to have

reviewed and considered the general state of the law and the

specific regulations governing the export of the commodity.

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Of course, a jury might assume that a company in the

business of high-tech developments and their export would

make itself aware of the pertinent export regulations. But

the government is expected to prove each separate element of

the offense beyond a reasonable doubt; and where knowledge

must be proved by inference, the government is quite right

not to take a casual view of its burden. The skull-and-

crossbones insignia on the medicine bottle does not prove

that the defendant read the small print instructions; but it

does tend to increase the likelihood.

Two other, more specific uses have been suggested by the

government for certain materials in the exhibits: to show, in

the case of one page in the 121-page compilation, that

Subilia was given a copy of item ECCN 1312A; and to indicate,

by showing who signed the State Department registration

papers, which persons in the corporate defendants took

responsibility for compliance. These uses, however, could be

satisfied by far less the full offerings made by the

government--the item page in the former case and the

signature page in the latter, together with context

testimony.

Lastly, the government's brief suggests or implies that

the exhibits (especially the news clippings and the 1984

request for proposals)--by implicating the likely military

end uses of the larger press and control panel--support a

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double proposition: that the Commerce Department would not

have granted a license for the control panel in this case if

a license had been sought, and that the defendants (being

aware of the exhibits) knew this to be true. This argument

raises the subtlest problem in the case.

The defendants say indignantly (and correctly) that the

crime charged relates to exporting listed commodities without

a license, not to exporting commodities that the government

would decline to license. Put differently, if a commodity is

not listed, its export does not violate this statute no

matter how vehemently the government objects to its export or

how swiftly it would deny a license if asked. The

government's opening brief is so framed as to invite this

response and to make it difficult to tell what other, more

defensible use of the double inference might be available.

The government's reply brief, however, offers (in a

lengthy footnote) two rebuttal arguments. One is that

defendants' knowledge that a license would likely be refused

helps, as part of a pattern of other evidence, to show that

the defendants' failure to apply for the license was out of

design and not a mistake of law. The other is that the known

intended end use has some bearing on the purpose for which

the control panel was designed and thus on whether it was

"specially designed" for use with a larger press; this last

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argument, needless to say, turns partly on how the phrase

"specially designed" is to be read.

Against these arguments for relevance must be set two

major concerns voiced by the district court. The first

involves the likelihood of undue prejudice, which the

district judge summed up by saying that he would not allow

this to become a missile case. Evidence is not unduly

prejudicial merely because it tends toward conviction; most

useful evidence for the government does that. The concern is

with any pronounced tendency of evidence to lead the jury,

often for emotional reasons, to desire to convict a defendant

for reasons other than the defendant's guilt. United States

v. Moccia, 681 F.2d 61, 63 (1st Cir. 1982).

In this case the district court had every reason to be

alert to this possibility. The government's disputed

exhibits (apart from the State Department papers) tend to

suggest that the defendants knew that they were aiding a

project to develop missile technology for the Indian

government. We can ignore, for present purposes, the

arguable chronological flaw in relying on the nine clippings

that post-date the exports in question (and the government's

interesting counter-argument). The 1984 request for

proposals, the 121-page compilation and the earliest press

clipping are potent enough.

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A jury, conscious of the risks of nuclear proliferation

and of U.S. government efforts to halt it, could easily

regard the defendants' alleged conduct as highly unattractive

even if it turned out to be technically legal. Other aspects

of the defendants' conduct (the 4.9 inch figure, the export

from Switzerland) could reinforce the adverse impression.

Any effort to dwell at length on the Indian government's

nuclear missile program and potential use of the press and

control panel in this case risks throwing gasoline on a

flickering flame. A judge would be blind not to see this

danger and to fear it.

Prejudice is not the only threat. There is also a

potential for confusing and misleading the jury. Quite apart

from prejudice, there is a risk that an undue emphasis on the

end use of the exported commodities could divert the jury's

attention from whether the commodity is listed and known to

be so, to whether the commodity is to be used for military

purposes. This deflection might seem like a gross error,

fairly easy to guard against in the instructions so far as

confusion is concerned (prejudice is a different matter); but

it is not the only problem.

As our discussion has already shown, the government is

interested in proving the known and intended military uses

not only to support its skull-and-crossbones theory of

heightened awareness but also to show that the government

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would have denied a license. This, in turn, invokes

arguments as to how this alleged fact--at first seemingly

irrelevant to the offense of not asking for a required

license--may help the government show scienter and even help

it show why the control panel should be deemed a listed

commodity. These arguments, raised tersely in the government

reply brief, may or may not have some basis in law and logic.

What is clear is that ample opportunity exists for jury

confusion if exhibits are justified and used in order to show

that the government would not have issued a license. It

would be quite a task to explain to a jury that this "fact"

is not an element in the violation but merely part of a

subtle and debatable chain of inferences designed to use this

license denial to show scienter and, more doubtfully, the

character of the control panel. We ourselves have had some

difficulty disentangling the government's theory of the

offense from these more recherche relevance arguments.

What we have said so far is that the district court was

balancing claims in which there was weight on both sides of

the scale. The evidence in question has some relevance--most

clearly on the skull-and-crossbones theory; but (putting

aside the single document page quoting item ECCN 1312A) it is

not direct evidence of knowledge of the law. At the same

time, the risks of undue prejudice are quite evident; and

risks of confusion are real too, especially if the government

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is allowed to develop and argue some of its more subtle and

questionable inferences. This dual threat of prejudice and

confusion is alone enough to lend support to the district

court's decision.

Our discussion thus far has not touched upon the

government's need for this evidence and the closely related

question of alternatives available to it. In applying Rule

403, it is plainly pertinent whether a litigant has some

alternative way to establish a fact that involves no (or at

least a lesser) risk of prejudice or confusion. 22 Wright &

Graham, supra, 5214 (citing cases). But here, in an

interlocutory appeal, we do not know very much about how else

the government might at trial seek to establish the

defendants' knowledge of the regulatory regime and the finer

shades of its likely interpretation.

What we do know is that the district court thought that

the government did have some less dangerous, if perhaps less

potent, means of establishing the defendants' familiarity

with the regulations and with the delicacy of their position.

As already noted, the court said that it was prepared to give

the government some leeway in this area. One can hardly

doubt that some evidence is available: merely as an example,

the selection of a 4.9 inch figure for the press pretty much

shows that someone in the organization knew about item ECCN

1312A.

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We think that the district court further showed a wise

flexibility in two other respects. It limited its exclusion

of the 13 exhibits in question to the government's case-in-

chief, knowing that positions taken or testimony offered by

the defense might warrant the court in relaxing the ban for

purposes of cross-examination or rebuttal. On a substantial

number of other exhibits objected to by defendants, the court

reserved its ruling, most likely until the evidence is

actually offered at trial. The court's exclusion of 13

exhibits certainly did not reflect a heavy-handed and

inflexible constraint.

We turn finally to a narrow concern that bolsters the

district court's decision on one remaining open point. In

the 121-page file a copy appears of item ECCN 1312A itself.

Unlike much of the excluded material, this page is directly

pertinent to the knowledge of at least one individual

defendant as to the existence of this item, and one might

think that this part of the exhibit ought to have made it

through the filter. The government mentions the page but

lays no special stress upon it. Perhaps it does not expect

the defendants to deny that they were aware of the

regulations.

The district court expressed concern that this exhibit

as a whole was a jumble of material, some rather patently

unrelated to anything in this case. The government had, and

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presumably still has, the option of identifying specific

pieces of information in the exhibit and urging that they be

considered separately from the rest. Without generalizing

too broadly, it is normally the case that this kind of

segregation is the job of counsel and not an already burdened

district judge. See Brooks v. Chrysler Corp., 786 F.2d 1191,

1199 (D.C. Cir.), cert. denied, 479 U.S. 853 (1986).

We conclude that the district court had an ample basis

under Rule 403 for excluding the 13 exhibits in question. We

commend the trial judge's thoughtful approach to the problems

presented and his efforts to balance the legitimate interests

on both side. The government may on reflection think that it

has cause to be grateful to the district court--both for

eliminating possible errors that could infect a trial and,

hopefully, for forcing the government to consider its

theories of the offense and of relevance with somewhat

greater precision before they are exposed to a jury.

IV.

Problems that can be treated with some confidence in

context are often very difficult to solve before other pieces

of the puzzle have been assembled. This, as we have said, is

why district courts are often hesitant to decide evidentiary

questions before trial. A like difficulty arises for an

appellate court where, as here, an interlocutory appeal

brings to the court only a part of the case. Thus, our task

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might be simplified if we could speak with assurance about

the standard of scienter or, for that matter, the definition

of "specially designed."

But these are not issues that have been briefed in this

court, we have not sought to address them, and nothing in

this opinion should be taken to suggest any view whatever as

to how those issues should be resolved. Similarly, we stress

again that what we have taken to be facts depends almost

entirely on the indictment and other descriptions of what the

government thinks it can prove. Any assertions of "fact" in

this opinion, including descriptions of documents or the

inferences to be drawn from them, are without prejudice to

what the trial may show or what may emerge after more context

has been supplied.

All that we hold is that the district court did not

abuse its discretion in excluding at this time from the

government's case in chief the 13 disputed exhibits, each

taken as a whole. Within very broad limits, the district

court is free to reexamine its position on any issue as the

case develops. See generally United States v. Uccio, 940

F.2d 753, 758 (2d Cir. 1991). We say this not to suggest any

disagreement whatever with the district court's rulings but

simply to underscore the limits on what this court has

decided.

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With these stipulations, the order under review

excluding the 13 exhibits is affirmed.

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