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Date: 09-21-2021
Case Style:
United States of America v. Gas Pipe, Incorporated; Amy Lynn, Incorporated;
Gerald Shults; Amy Herrig
Case Number: 19-11145
Judge: Stephen A. Higginson
Court: United States Court of Appeals
for the Fifth Circuit
Plaintiff's Attorney: United States Attorney’s Office
Defendant's Attorney:
Description:
New Orleans, LA - Criminal defense lawyer represented defendants with one count of conspiracy to defraud the United States charge.
Appellants Gas Pipe, Inc., Amy Lynn, Inc., Gerald Shults, and Amy
Herrig owned and operated a chain of smoke shops in Texas and New
Mexico.1
Among the products on offer at Gas Pipe stores were syntheticcannabinoid products branded as “herbal incense,” “potpourri,” or “aroma
therapy products,” commonly known as “spice.” Spice, when smoked,
produces a stimulant, depressant, or hallucinogenic effect on the central
nervous system.
For the past decade, the federal government has scheduled various
synthetic cannabinoids as illegal controlled substances. Given that there are
more than 700 known synthetic cannabinoids, the process of scheduling is
iterative, with more synthetic cannabinoids being scheduled as the Drug
Enforcement Administration (“DEA”) and Food and Drug Administration
(“FDA”) analyze them and their effects. But regardless of whether a
1 Shults owned Gas Pipe, Inc. and Amy Lynn, Inc. Herrig, Shults’s daughter,
helped run the companies.
No. 19-11145
3
synthetic cannabinoid has been scheduled, it may not be sold for human
consumption absent FDA approval and proper labeling.
The appellants labeled their products as “not for human
consumption.” But, as the appellants stipulated at trial, they knew that the
spice products sold by Gas Pipe stores were mislabeled because they were
intended for human consumption. Indeed, Gas Pipe’s spice products were
sometimes rated based on their “strength,” meaning how “high” it would
get the user. Between 2011 and 2014, the appellants sold more than two
million units of spice totaling more than $40 million in revenue.
In late 2013, the DEA started an undercover investigation into the
appellants’ spice sales. DEA agents posed as customers and made 34
“controlled buys” to determine whether the appellants were selling spice for
human consumption. The agents had the spice analyzed by a lab, and results
revealed that the spice contained various synthetic cannabinoids. On June 4,
2014, DEA agents executed search warrants at all of the appellants’ stores
and warehouses and seized spice containing synthetic cannabinoids, some of
which had already been scheduled as controlled substances.
A grand jury returned a Third Superseding Indictment in September
2016. The indictment charged the appellants and six of their employees with
11 counts.2 Count One charged the appellants with violating 18 U.S.C. § 371,
which, inter alia, prohibits conspiracies to “defraud the United States.”
Specifically, this Count alleged that the appellants (1) conspired to defraud
the FDA and (2) conspired to commit felony misbranding under 21 U.S.C.
§§ 331, 333(a)(2), and 352 “by introducing or delivering an adulterated or
2 Three of the employees pleaded guilty, one of whom testified for the Government
at trial. The district court granted the fourth employee’s Rule 29 motion. The jury
acquitted the two remaining employees.
No. 19-11145
4
misbranded drug into interstate commerce with the intent to defraud or
mislead.”
After a three-week trial, the jury found the appellants guilty on Count
One and acquitted them on the remaining counts.3 Subsequently, after a twoday hearing, the district court sentenced Shults and Herrig to 36 months’
imprisonment, two years’ supervised release, and a $100 special assessment.
The court sentenced each of the corporate entities, Gas Pipe and Amy Lynn,
to a $25,000 fine.
II.
The appellants first make two arguments as to why Count One of the
indictment was legally insufficient. Because they preserved their challenges,
we review them de novo. United States v. Anderton, 901 F.3d 278, 282 (5th
Cir. 2018).
First, the appellants argue that the word “defraud,” as used in 18
U.S.C. § 371, should be cabined to its common law meaning of cheating the
Government out of property or money. It cannot, they say, reach agreements
for the purpose of impeding a government agency’s functions. As the
appellants acknowledge, however, a long line of Supreme Court and circuit
precedent holds otherwise, and we reject this argument as foreclosed.4
3 The ten other counts charged in the indictment were: conspiracy to commit mail
and wire fraud (Count Two); assorted controlled substance–related offenses (Counts
Three through Ten); and conspiracy to commit money laundering (Count Eleven). Prior
to trial, the district court granted the Government’s motion to dismiss Count Two.
4 See Haas v. Henkel, 216 U.S. 462, 479 (1910) (“[I]t is not essential that such a
conspiracy shall contemplate a financial loss or that one shall result. The statute is broad
enough in its terms to include any conspiracy for the purpose of impairing, obstructing, or
defeating the lawful function of any department of government.”); Hammerschmidt v.
United States, 265 U.S. 182, 188 (1924) (“It is not necessary that the government shall be
subjected to property or pecuniary loss by the fraud, but only that its legitimate official
No. 19-11145
5
Second, the appellants argue that this court should impose a “limiting
principle” on § 371’s defraud clause in light of the Supreme Court’s recent
construction of purportedly similar language in another federal criminal
statute. Specifically, they ask this Court to extend a rule announced in
Marinello v. United States, 138 S. Ct. 1101 (2018)—that to convict under 26
U.S.C. § 7212(a)’s omnibus clause, the Government must show a “nexus”
between the defendant’s conduct and a pending or reasonably foreseeable
tax-related administrative proceeding, such as an investigation or audit, id. at
1109–10—and apply it to § 371. A recent case, United States v. Herman, No.
19-50830, --- F.3d ---- (5th Cir. May 6, 2021), controls. In Herman, we
rejected an identical argument and declined to extend the Marinello nexus
requirement to § 371’s defraud clause, and we reject the appellants’
arguments as foreclosed here.
These same two legal arguments also form the basis of the appellants’
challenge to the district court’s conspiracy-to-defraud jury instructions, and
thus that challenge also fails. The appellants preserved their objections to
the conspiracy-to-defraud instructions. We ordinarily review jury
instructions for abuse of discretion. But when, as here, the appellants argue
that the instruction misstates an element of the offense, that is an issue of
statutory construction, which we review de novo subject to harmless error
review. United States v. Garcia-Gonzalez, 714 F.3d 306, 312 (5th Cir. 2013);
United States v. Guevara, 408 F.3d 252, 257 (5th Cir. 2005).
action and purpose shall be defeated by misrepresentation, chicane, or the overreaching of
those charged with carrying out the governmental intention.”); Dennis v. United States, 384
U.S. 855, 861 (1966) (affirming Hammerschmidt); United States v. Haga, 821 F.2d 1036,
1040 (5th Cir. 1987) (applying Hammerschmidt); United States v. Hopkins, 916 F.2d 207, 213
(5th Cir. 1990) (same); United States v. Martin, 332 F.3d 827, 834 (5th Cir. 2003) (same);
see also United States v. Coplan, 703 F.3d 46, 61 (2d Cir. 2012) (applying Hammerschmidt
and its progeny despite noting “infirmities in the history and deployment of [§ 371]”).
No. 19-11145
6
Specifically, the appellants argue that the district court committed
reversible error in its conspiracy-to-defraud jury instructions by (1) failing to
limit the defraud theory to agreements to cheat the Government out of
money or property and (2) refusing to provide a Marinelloinstruction that the
Government must prove a nexus between the conspiracy and a particular
administrative proceeding. Because we rejected the appellants’ two legal
arguments above about the scope of § 371’s defraud clause and the effect of
Marinello, we accordingly hold that the district court’s conspiracy-to-defraud
jury instructions were correct statements of law.
III.
The appellants next challenge the district court’s jury instructions
about felony misbranding in two respects. First, they argue that 21 U.S.C.
§ 333(a)(2)’s requirement that a violation be committed with “intent to
defraud or mislead” incorporates a separate materiality element that was not
included in the jury charge. Second, the appellants contest the district
court’s refusal to instruct the jury that an “intent to defraud or mislead”
under § 333(a)(2) requires “an intent to deceive or cheat connected with the
misbranding.”
A.
The appellants’ first claim of instructional error—that the district
court failed to include materiality as an element of felony misbranding—
asserts misstatement of an element and hinges on statutory interpretation.
The court’s review is therefore de novo, subject to harmless error analysis.
See Garcia-Gonzalez, 714 F.3d at 312; Guevara, 408 F.3d at 257.
Section 333 of the Food, Drug, and Cosmetic Act (“FDCA”) imposes
felony liability for misbranding drugs with the “intent to defraud or mislead.”
21 U.S.C. § 333(a)(2). Invoking Neder v. United States, 527 U.S. 1 (1999), and
United States v. Watkins, 278 F.3d 961 (9th Cir. 2002), the appellants argue
No. 19-11145
7
that this FDCA provision requires proof of materiality. In general, a
statement is material if it has “a natural tendency to influence, or [is] capable
of influencing, the decision of the decisionmaking body to which it was
addressed.” Neder, 571 U.S. at 16 (alteration in original) (quoting United
States v. Gaudin, 515 U.S. 506, 509 (1995)); see also United States v. Arlen, 947
F.2d 139, 143 (5th Cir. 1991) (finding felony misbranding when the defendant,
inter alia, acted with the “specific intent to defraud or mislead an identifiable
government agency” (emphasis added)). Thus, if applicable here, proof of
materiality would require demonstrating that the appellants’ misbranding
had a tendency to influence, or was capable of influencing, the FDA’s
decisionmaking.
In Neder, the Supreme Court considered whether materiality is an
element of a “scheme or artifice to defraud” under the federal mail fraud (18
U.S.C. § 1341), wire fraud (id. § 1343), and bank fraud (id. § 1344) statutes.
571 U.S. at 20. Invoking the “well-established rule of construction that
‘[w]here Congress uses terms that have accumulated settled meaning under
. . . the common law, a court must infer, unless the statute otherwise dictates,
that Congress means to incorporate the established meaning of these
terms,’” the Court concluded that “the common law could not have
conceived of ‘fraud’ without proof of materiality.” Id. at 21–22 (alterations
in original) (quoting Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322
(1992)). Accordingly, the Court held that it “must presume that Congress
intended to incorporate materiality ‘unless the statute otherwise dictates.’”
Id. at 23 (quoting Darden, 503 U.S. at 322). In Watkins, the Ninth Circuit
followed the logic of Neder and extended the materiality requirement to the
“intent to defraud” and the “intent to . . . mislead” FDCA provisions at
issue here. 278 F.3d at 966, 969.
No. 19-11145
8
Assuming without deciding that materiality is an element of
§ 333(a)(2)’s felony misbranding offense,5 under the facts of this case, any
error was harmless. See Neder, 527 U.S. at 8–15.
To the extent that the district court erred in omitting materiality as an
element of § 333(a)(2), the error was harmless if, “after a ‘thorough
examination of the record,’ [we are] able to ‘conclude beyond a reasonable
doubt that the jury verdict would have been the same absent the error.’”
United States v. Cessa, 785 F.3d 165, 186 (5th Cir. 2015) (quoting United
States v. Skilling, 638 F.3d 480, 482 (5th Cir. 2011)); see also Neder, 527 U.S.
at 19. Here, we must determine whether the jury would have found that the
appellants’ misbranding was material—that is, had “a natural tendency to
5 The text and structure of the FDCA cast doubt as to whether Neder extends to
§ 333(a)(2)’s felony misbranding offense. Although § 333(a)(2) itself does not specifically
reference materiality, it is interpretively significant that other sections of the FCDA do.
E.g., 21 U.S.C. §§ 331(q)(2), 331(y)(1), 334(a)(1)(B), 335a(g)(1)(A)(ii), 335b(a)(1),
335c(a)(1), 343(a)(2) (expressly prohibiting misleading representations or omissions that
are “material”). This suggests choice, and a choice to not employ a term in one provision
but to use it in neighboring provisions suggests a meaning through the absence of that term.
See Pereira v. Sessions, 138 S. Ct. 2105, 2114 (2018) (looking to a “neighboring statutory
provision” for “contextual support”); Russello v. United States, 464 U.S. 16, 23 (1983)
(“[W]here Congress includes particular language in one section of a statute but omits it in
another section of the same Act, it is generally presumed that Congress acts intentionally
and purposely in the disparate inclusion or exclusion. . . . We would not presume to ascribe
this difference to a simple mistake in draftsmanship.” (first alteration in original) (internal
quotation marks and citation omitted)). Another provision of the FDCA, however, cuts in
the opposite direction. The statute’s definitions section indicates that materiality must be
considered in evaluating misbranding offenses. See 21 U.S.C. § 321(n) (“If an article is
alleged to be misbranded because the labeling or advertising is misleading, then in
determining whether the labeling or advertising is misleading there shall be taken into
account . . . the extent to which the labeling or advertising fails to reveal facts material in
the light of such representations or material with respect to consequences which may result
from the use of the article . . . .” (emphasis added)). But we pretermit this debate because,
under the facts of this case, any error the district court made in omitting materiality as an
element of § 333(a)(2) was harmless.
No. 19-11145
9
influence, or [was] capable of influencing” the FDA’s decisionmaking.
Neder, 527 U.S. at 16; accord Arlen, 947 F.2d at 143.
Our review of the record shows, beyond a reasonable doubt, that the
jury would have concluded that the appellants’ misbranding tended to
influence, or was capable of influencing, the FDA’s decisionmaking based on
evidence presented at trial.
First, Lawrence Shahwan, who supplied spice to the appellants,
testified that the reason he labeled his product “Not for Human
Consumption” was because that was “the only way that we could sell it to
the public. If it was stated for human consumption, it would be subject to FDA
regulations. And obviously we wouldn’t be able to sell these products for
human consumption.” Second, Joshua Campbell, a former manager of a Gas
Pipe store, testified that the appellants sold spice packaged as if it were
“herbal incense” or “potpourri” even though “[i]t really wasn’t.” He
testified that this terminology was “important” to Shults and Herrig
“[b]ecause of the legality of what spice was.” Directly connecting this
practice to the appellants’ intent, Campbell testified that Shults and Herrig
“didn’t want to sell [spice] as a consumable because it would have to go through the
FDA . . . .” Campbell was not simply guessing as to the appellants’ intent;
he testified that they were “very strict on terminology” and that he
participated in weekly conference calls with Shults and Herrig in which spice
sales were their “primary concern.”
Although the Government highlights other evidence—including
emails and contemporaneous notes that show the appellants were monitoring
FDA actions regarding spice and additional witness testimony about the
appellants’ knowledge of the regulatory landscape—Shahwan’s and
Campbell’s testimony are sufficient to show that the appellants sold spice
labeled “Not for Human Consumption” to evade the FDA’s regulatory
No. 19-11145
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scrutiny and that, if the appellants’ products had been correctly labeled as
intended for human consumption, they would have been subject to FDA
regulation. The mislabeling therefore had “a natural tendency to influence,
or [was] capable of influencing” the FDA’s decisionmaking and thus was
“material.” Neder, 527 U.S. at 16.
B.
The appellants’ second claim is that the district court should have
specifically defined § 333(a)(2)’s use of “intent to defraud or mislead” as
“an intent to deceive or cheat connected with the misbranding.”
This argument presents a “framing” issue reviewed for abuse of
discretion. Eastman Chem. Co. v. Plastipure, Inc., 775 F.3d 230, 240 (5th Cir.
2014); see also United States v. Jones, 664 F.3d 966, 978 (5th Cir. 2011). Under
that standard, “[w]e will reverse the district court’s decision only if the
requested instruction (1) was a substantially correct statement of the law,
(2) was not substantially covered in the charge as a whole, and (3) concerned
an important point in the trial such that the failure to instruct the jury on the
issue seriously impaired the defendant’s ability to present a given defense.”
United States v. Wright, 634 F.3d 770, 775 (5th Cir. 2011) (internal quotation
marks omitted) (quoting Cooper Indus., Inc. v. Tarmac Roofing Sys., Inc., 276
F.3d 704, 714 (5th Cir. 2002)). We “afford the trial court great latitude in
the framing and structure of jury instructions.” Eastman, 775 F.3d at 240.
Count One of the indictment charged the appellants with conspiring
to defraud the United States by (1) conspiring to defraud the FDA and
(2) conspiring to introduce misbranded drugs into interstate commerce with
the intent to defraud or mislead. When instructing the jury about the
conspiracy to defraud the FDA, the district court separately defined
“defraud”: “The word ‘defraud’ here is not limited to its ordinary meaning
of cheating the government out of money or property; it also includes
No. 19-11145
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impairing, obstructing, defeating, or interfering with the lawful function of
the government or one if its agencies by dishonest means.” When instructing
the jury about conspiracy to commit felony misbranding, the district court
did not separately define “defraud,” but when instructing the jury about the
lesser included offense, conspiracy to commit simple misbranding, the
district court referenced its earlier definition of the word “defraud”: “You
should find the defendant you are considering guilty of conspiracy to commit
simple misbranding if . . . the defendant made an agreement as a result of
which the misbranding offense . . . occurred, but that the government has not
proved that the defendant you are considering intended to defraud or
mislead, as I have defined that phrase.” The appellants argue that by
instructing the jury on felony misbranding with the bare statutory language
“intent to defraud or mislead” and then cross-referencing the “defraud”
definition, the district court’s instructions confused the jury on the meaning
of “defraud or mislead” as used in the felony misbranding offense.
This court rejected a similar argument in United States v. Haas, 171
F.3d 259 (5th Cir. 1999). Like the appellants, the defendant in that case was
convicted of conspiracy to defraud the FDA and conspiracy to commit felony
misbranding. Id. at 263–64. Also like the appellants, the defendant argued
that “the district court erred when it failed to define the phrase ‘intent to
defraud’” under § 333(a)(2) as intent “to deceive or to cheat.” Id. at 267.
This court affirmed, holding that “this additional language, beyond the
instruction that the court gave, would add little to the jurors’ understanding
of the phrase ‘intent to defraud.’” Id.
The appellants try to distinguish Haas by pointing out that the jury
instructions in that case did at least specify that fraudulent misbranding
requires “deceit, craft or trickery or at least . . . means that are dishonest.”
Here, however, the district court’s instructions on the meaning of “defraud”
included a similar gloss, referencing “cheating” and “dishonest means.”
No. 19-11145
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The appellants do not explain why these words should be deemed
inadequate. Moreover, courts have interpreted § 333(a)(2)’s use of “intent
to defraud or mislead” along similar lines as § 371’s use of “defraud.”
Compare Tanner v. United States, 483 U.S. 107, 128 (1987) (“[T]he fraud
covered by [§ 371] reaches any conspiracy for the purpose of impairing,
obstructing or defeating the lawful function of any department of
Government.” (internal quotation marks and citation omitted)), with Arlen,
947 F.2d at 143 (holding that “intent to defraud or mislead” under
§ 333(a)(2) reaches misbranding offenses “committed with the specific
intent to defraud or mislead an identifiable government agency”). The
district court did not err in declining to specifically equate “intent to defraud
or mislead” with “intent to deceive or cheat.”
The appellants also argue that the district court erred by not
instructing the jury that an “intent to deceive or cheat” must be
“connected” to misbranding. We disagree. Although the district court did
not adopt the exact wording proposed by the appellants, it instructed the jury
that a conviction for felony misbranding required a finding “[t]hat a person
mislabeled the drug and the defendant, by such mislabeling, intended to
defraud or mislead.”
For these reasons, the district court’s jury instruction “substantially
covered” the appellants’ proposed instruction and did not misstate the law.
Wright, 634 F.3d at 775.
IV.
The appellants next challenge the sufficiency of the evidence for
conviction under Count One.
The parties agree that the appellants preserved their sufficiency
challenges to their convictions by timely moving for acquittal under Rule 29
of the Federal Rules of Criminal Procedure. See United States v. Bolton, 908
No. 19-11145
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F.3d 75, 89 (5th Cir. 2018); Fed. R. Crim. P. 29(a), (c). This court
“review[s] preserved challenges to the sufficiency of the evidence de novo,
but [the court is] highly deferential to the verdict.” United States v. Scott,
892 F.3d 791, 796 (5th Cir. 2018) (internal quotation marks and citation
omitted). This means that the court “view[s] all evidence, whether
circumstantial or direct, in the light most favorable to the government, with
all reasonable inferences and credibility choices to be made in support of the
jury’s verdict.” Bolton, 908 F.3d at 89 (internal quotation marks and citation
omitted). Evidence is sufficient to support a conviction so long as “any
rational trier of fact could have found the essential elements of the crime
beyond a reasonable doubt.” Scott, 892 F.3d at 797 (emphasis, internal
quotation marks, and citation omitted).
A.
The appellants raise a combination of legal and factual challenges to
the sufficiency of the evidence supporting their convictions for conspiracy to
defraud the FDA. They assert that (1) Marinello upsets their conviction
because there was insufficient evidence showing that the appellants agreed to
interfere with or obstruct “a particular administrative proceeding”; (2) the
FDA could not have been defrauded because there was no evidence of an
ongoing FDA investigation into their spice sales before the June 2014 raid;
and (3) the evidence was insufficient for the jury to rationally conclude that
they intended to defraud the FDA.
First, the appellants reprise their argument that Marinello, 138 S. Ct.
1101, required the Government to put on evidence that they agreed to
interfere with or obstruct a particular FDA proceeding that was then pending
or reasonably foreseeable. For the reasons already discussed, supra section
II, the Government was not required to make this showing.
No. 19-11145
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Second, the appellants claim that the FDA could not have been
defrauded within the meaning of § 371 because there was no evidence of the
FDA’s involvement prior to the June 2014 raids and therefore they could not
have intentionally or with knowledge defeated the FDA’s mission. This
argument misstates the law: the Government is not required to establish the
FDA’s participation in the underlying criminal investigation or the
appellants’ knowledge of any such participation. “The defraud clause of
§ 371 reaches . . . any conspiracy designed to impair, obstruct, or defeat the
lawful function of any department of the government”—in this case, a
conspiracy to avoid contact with the FDA to avoid regulation. United
States v. Clark, 139 F.3d 485, 488–89 (5th Cir. 1998); see also United States v.
Dessart, 823 F.3d 395, 403 (7th Cir. 2016) (Ҥ 333(a)(2) applies if the
defendant intended to deceive either consumers or the FDA or both.”). At
bottom, this argument repackages the appellants’ incorrect Marinello
rationale.
Third, the appellants assert that the Government did not present
evidence from which the jury could conclude that they intended to defraud
the FDA. We disagree. As discussed, supra section III.A, the appellants’
supplier, Lawrence Shahwan, and their employee, Joshua Campbell, both
testified that the appellants labeled these products “not for human
consumption” to avoid scrutiny or regulation by the FDA. Shahwan also
testified that it was obvious that the products could not have been sold if
intended for human consumption. Viewing the evidence in the light most
favorable to the Government and all reasonable inferences in support of the
jury’s verdict, Bolton, 908 F.3d at 89, we conclude that a rational jury could
find that the evidence was sufficient to convict the appellants of conspiracy
to defraud the FDA. See Haas, 171 F.3d at 266 (“We need not list all of the
evidence a jury could have considered in concluding that [the appellants]
No. 19-11145
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intended to defraud the FDA—we will only consider a few examples.”);
Dessart, 823 F.3d at 403.
B.
The appellants also argue that the evidence was insufficient to prove
the felony misbranding offense because the Government did not establish
beyond a reasonable doubt that the public was misled by the labeling or that
the appellants intended to defraud or mislead the Government. We need not
reach this question. The district court gave a unanimity instruction, and the
jury convicted the appellants on Count One after separately concluding that
the appellants conspired to defraud the FDA and also that they conspired to
commit felony misbranding. The appellants’ convictions on Count One can
be sustained by our conclusion that the evidence was sufficient to convict the
appellants of conspiring to defraud the FDA. See United States v. Mauskar,
557 F.3d 219, 229 (5th Cir. 2009) (“[A] general guilty verdict on a multipleobject conspiracy may stand even if the evidence is insufficient to sustain a
conviction on one of the charged objects.” (alteration in original) (quoting
United States v. Mann, 493 F.3d 484, 492 (5th Cir.2007))).
V.
Finally, Shults and Herrig appeal the substantive reasonableness of
their 36-month sentences, which we review for abuse of discretion. United
States v. Sifuentes, 945 F.3d 865, 868 (5th Cir. 2019).
“This court recognizes three types of sentences: (1) a sentence within
a properly calculated Guidelines range; (2) a sentence that includes an
upward or downward departure as allowed by the Guidelines; and (3) a nonGuideline sentence or a variance that is outside of the relevant Guidelines
range.” United States v. Brantley, 537 F.3d 347, 349 (5th Cir. 2008) (internal
quotation marks omitted) (quoting United States v. Smith, 440 F.3d 704, 706–
08 (5th Cir. 2006)). If “the district court imposes a sentence that is outside
No. 19-11145
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the guidelines framework, such a sentence is considered a variance.” United
States v. Jacobs, 635 F.3d 778, 782 (5th Cir. 2011) (internal quotation marks
omitted). The district court must explain its reasons for imposing any
variance under the § 3553(a) factors. Id. “A non-Guideline sentence
unreasonably fails to reflect the statutory sentencing factors where it
(1) does not account for a factor that should have received significant weight,
(2) gives significant weight to an irrelevant or improper factor, or
(3) represents a clear error of judgment in balancing the sentencing factors.”
Smith, 440 F.3d at 708.
Contrary to Shults and Herrig’s assertion, the district court imposed
their sentences as upward variances after carefully considering the § 3553(a)
factors. The court highlighted that Shults and Herrig engaged in “very
serious” conduct because they sold a product that “is dangerous and
addictive”; discussed Shults’s and Herrig’s histories and characteristics;
and confirmed that the sentences imposed were necessary “to promote
respect for the law, while justly punishing” Shults and Herrig and “hopefully
deterring others from engaging in similar conduct.” The court recognized
that the 36-month sentences exceeded the Guidelines range for Shults and
Herrig but confirmed its view that the § 3553(a) factors required those
sentences.
In their opening brief, Shults and Herrig incorrectly argue that the
variance rested “on the same ground” as the departure, and they do not
argue that the district court misapplied the § 3553(a) factors. Only in their
reply brief do they assert an error as to the § 3553(a) factors, but arguments
raised for the first time in a reply brief are waived. United States v. Jackson,
426 F.3d 301, 304 n.2 (5th Cir. 2005). Shults and Herrig have not shown that
the district court abused its discretion in imposing the upward variances.
No. 19-11145
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Because the district court justified Shults’s and Herrig’s sentences as
both variances and departures, we need not consider the propriety of their
sentences as an upward departure. Instead, we affirm the sentences on the
district court’s basis as an upward variance justified by the § 3553(a) factors.
See United States v. Hebert, 813 F.3d 551, 561 (5th Cir. 2015) (declining to
reach an “issue of first impression” whether a particular sentencing
departure was impermissible “because [defendant’s] sentence may be
affirmed on the district court’s alternate basis for the sentence—that the
sentence is appropriate as an upward variance”); Brantley, 537 F.3d at 349
(“The district court stated that based on the § 3553(a) factors, the sentence
was outside of the Guidelines range both as an upward departure and as a
variance. For present purposes, however, the specific characterization is
irrelevant because . . . the sentence imposed was reasonable under the
totality of the relevant statutory factors.” (internal quotation marks and
citation omitted)).
Outcome: We AFFIRM the district court on all issues, holding that the
allegations in Count One of the indictment charging the appellants with
conspiracy to defraud the FDA in violation of 18 U.S.C. § 371 were legally
sufficient, the district court correctly instructed the jury on the charge of
conspiracy to defraud the Government, the district court correctly instructed
the jury on the charge of conspiracy to commit felony misbranding, the
evidence was sufficient for the jury to convict the appellants on Count One,
and Shults’s and Herrig’s 36-month prison sentences were substantively
reasonable
Plaintiff's Experts:
Defendant's Experts:
Comments: