Friday, August 11, 2006

Opinion Withdrawn and Replaced Due to Government's Factual Misrepresentation

United States v. Zheng, No. 05-20144 (5th Cir. Aug. 10, 2006)

You don't see this everyday:

We previously issued an opinion that was predicated, in part, on a misrepresentation by the government. See United States v. Yi, 451 F.3d 362 (5th Cir. 2006). Upon reconsideration, we withdraw the prior opinion in its entirety and replace it with the following.

Slip op. at 1. The part to which the opening line refers is Zheng's sufficiency challenge to his convictions on six counts of trafficking in counterfeit goods. The government misrepresented a fact that was material to the court's rejection of the sufficiency challenge as to count 6.

Zheng owned a discount retail store in Houston called XYZ Trading Corp. In June 2003 an ICE agent in Norfolk, Virginia inspected and seized a shipping container bound for XYZ from China. The agent seized the container because it contained various counterfeit electrical goods (batteries, power cords, and flashlights). The agent also seized a second container shipped from China to XYZ a few weeks later. That shipment included 4,000 pairs of counterfeit Nike sandals.

A couple of months later ICE agents executed a search warrant at XYZ and found a variety of counterfeit merchandise, as well as cease and desist letters from the owners of some of the infringed trademarks. Some of that merchandise was the same as that found in the first shipping container in Norfolk. There were no fake Nike sandals or similar items in the store, nor was there a cease and desist letter from Nike.

Zheng was convicted at a jury trial of six counts of trafficking in counterfeit goods, in violation of 18 U.S.C. § 2320. Counts 1 through 5 were based on the counterfeit merchandise seized at XYZ in Houston. Count 6 was based on the Nike sandals in the second shipping container seized in Norfolk.

On appeal Zheng argued that there was insufficient evidence to prove beyond a reasonable doubt that he knew the trademarks were counterfeit, an essential element of the offense. The original opinion rejected Zheng's sufficiency challenge in part because it understood the evidence to show that had Zheng rejected opportunities to inspect both shipping containers. (I don't quite understand why that evidence suggested that Zheng knew the trademarks were fake, but the court found it significant.)

However, in the substituted opinion, the panel affirmed the convictions only on counts 1 through 5. As it turned out, "[o]n the first go-around, the government misrepresented a fact material to our decision to uphold Zheng's conviction [on count 6] for trafficking in the counterfeit Nike sandals: that Zheng was given and declined the opportunity to inspect the second shipment containing the Nike sandals." Slip op. at 9, n.7. The remaining evidence, which was "at best, weak and attenuated[,]" was insufficient to support Zheng's conviction on count 6.

Apart from the sufficiency challenge, the court rejected Zheng's arguments regarding a number of evidentiary matters (including, inter alia, the Government's reference at trial to Zheng's immigration status, and testimony that traffic in counterfeit goods helps to finance terrorism).

Finally, the court held that the district court's factual finding regarding the infringment amount under U.S.S.G. §2B5.3(b)(1) was "implausible in light of the entire record and [was] clearly erroneous." Slip op. at 20-21. For that reason, and because of the vacatur of Zheng's conviction on count 6, the court vacated the sentence and remanded for resentencing.


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