Wednesday, October 15, 2008

United States v. Goldberg, 538 F.3d 280 (3d Cir. 2008).

The defendant in Goldberg ran a business that sold veterinary grade prescription drugs to horse owners without proof of a prescription. The government charged him with, inter alia, possessing the controlled substance Stanozolol with the intent to distribute, and various misbranding charges. Following conviction by a jury on all counts, the defendant appealed, challenging various aspects of his convictions as well as the application of certain guideline provisions at setencing.

1. Whether possession of a controlled substance required the actual possession to be illegal as well as the intent to distribute - During deliberations, the jury asked a question that essentially inquired whether it needed to find that the defendant's "possession" of Stanozolol was illegal as well as his intent to distribute. Despite the defendant's claim that the term "possession" in the statute "implied" that the possession must be illegal, the district court instructed the jury that it simply needed to find that the defendant possessed Stanozolol, without qualifying whether the possession had to be legal or illegal. The Third Circuit affirmed the district court's actions, holding that the term "possession" was not limited only to instances of illegal possession.

2. Whether certain hearsay testimony that admittedly violated the Confrontation Clause was harmless beyond a reasonable doubt- During trial, the government introduced certain hearsay statemtned that suggested the defendant's possession of the Stanozolol he intended to distribute was illegal. Because the Third Circuit found that the question regarding the legality of the possession was irrelevant, it likewise found that the admission of the hearsay testimony "into the mix of information the jury was considering in relation to [the possession] charge was harmless." The Court also found that while the testimony "undoubtedly impugned" the defendant's credibility, his credibility simply was not an issue at trial based on the nature of the facts and the defense the defendant raised.

3. Whether the evidence was sufficient to support convictions for felony misbranding under 21 U.S.C. 331(k) - The defendant raised the legal argument that the act of dispensing the drugs in question merely without a prescription did not qualify as misbranding under a proper interpretation of the statute. Instead, the defendant argued, the statute required the defendant to somehow alter the product in some way. The Third Circuit rejected this argument, concluding that any confusion in the language of the statute was "resolved by the relatively straightforward declaration that dispensing drugs without a prescription means that those drugs were misbranded while they were held for sale." However, the Court did find that the evidence did not support the conclusion that the defendant "acted with an intent to defraud of mislead." Therefore, under the statute, his conduct only rose to the level of a misdemeanor misbranding, instead of a felony, of which the defendant was originally convicted.

4. Whether the district court properly calculated the loss attributable to the defendant under U.S.S.G. 2B1.1(b)(1) - In calculating the amount of loss attributable to the defendant's crimes, the district court used the "total gross profits" from the defendant's scheme "as a proxy for the losses suffered." Affirming this approach, the Third Circuit relied on Application Note 3 to 2B1.1, which addresses schemes involving the sale of items "for which regulatory approval by a government agency was required but not obtained." Note 3 states that in such a scenario, the "loss shall include the amount paid" for the items in question. The Court then concluded that the drugs being sold in the defendant's case required F.D.A. approval, and because he had not obtained such approval, Note 3 was applicable and the district court's approach to determining loss was consistent with its instruction.

5. Whether the "Administrative Order" enhancement under U.S.S.G. 2B1.1(b)(8) was appropriate - Finally, the Court considered whether it was appropriate for the district court to apply a 2-level enhancement under U.S.S.G. 2B1.1(b)(8) for violating a prior judicial or administrative order. First, the Court explained that "[a]s a general rule, courts . . . have been willing to impose the enhancement after a meaningful negotiation or interaction led the agency to issue a directive that the defendant subsequently violated." It then concluded that the enhancement "requires an interaction between the agency and defendant that allowed the defendant to participate in some meaningful way . . . and that led to a definite result, like a consent decree or a seizure." Based on these parameters, the Court then concluded that the F.D.A.'s "warning letter" to the defendant did not justify the enhancement. The Court also concluded that a state "cease and desist" letter likewise did not justify the enhancement because it did not offer the defendant the chance to participate in the process in any meaningful way.

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The District Court's indication of the sentence it would impose before the defendant allocuted was not reversible plain error.

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