Summary
holding that the government's open file production of ESI consisting of six million pages of documents did not violate Brady when the government did not conceal exculpatory material in the voluminous production, pad its file with pointless information to increase the defendant's burden, or otherwise act in bad faith
Summary of this case from McGuiness v. StateOpinion
Case No. 8:18-CR-00014 JLS
2019-12-20
UNITED STATES of America, Plaintiff, v. Jeffrey David GROSS, Defendant.
Ashwin Janakiram, AUSA-Office of US Attorney Major Frauds Section, Los Angeles, CA, Joseph Timothy McNally, Scott D. Tenley, AUSA-Office of US Attorney, Santa Ana, CA, for Plaintiff. Hamilton E. Arendsen, Arendsen Cane Molnar LLP, San Diego, CA, Mark Mermelstein, Mona Samir Amer, Orrick Herrington and Sutcliffe LLP, Los Angeles, CA, for Defendant.
Ashwin Janakiram, AUSA-Office of US Attorney Major Frauds Section, Los Angeles, CA, Joseph Timothy McNally, Scott D. Tenley, AUSA-Office of US Attorney, Santa Ana, CA, for Plaintiff.
Hamilton E. Arendsen, Arendsen Cane Molnar LLP, San Diego, CA, Mark Mermelstein, Mona Samir Amer, Orrick Herrington and Sutcliffe LLP, Los Angeles, CA, for Defendant.
ORDER GRANTING IN PART MOTION TO CONTINUE
ORDER GRANTING IN PART GOVERNMENT MOTION IN LIMINE NO. 1
ORDER GRANTING IN PART AND RESERVING RULING IN PART AS TO GOVERNMENT MOTION IN LIMINE NO. 2
ORDER GRANTING GOVERNMENT MOTION IN LIMINE NO. 3
The Hon. Josephine L. Staton, United States District Judge This matter is before the Court on three Motions in Limine filed by the Government and on Defendant's Motion to Continue Trial. These matters are fully briefed and were heard on November 15, 2019. The Court permitted Defendant to file supplemental materials related to a showing of diligence. Those materials were filed in camera by Defendant on November 22, 2019, and include Defendant's Further Submission in Support of Motion to Continue Trial, and the Large, Indeglia, Mermelstein and Arendsen Declarations. The Court has reviewed these materials.
As set forth herein, the Court GRANTS IN PART Defendant's Motion to Continue, GRANTS IN PART the Government's Motion in Limine No. 1, GRANTS IN PART and reserves ruling in part as to the Government's Motion in Limine No. 2, and GRANTS the Government's Motion in Limine No. 3.
I. Background
Defendant is a neurosurgeon who was indicted as part of the Drobot/Pacific Hospital kickback conspiracy/fraud scheme. (See generally Doc. 1, Indictment.) The scheme alleged in the Indictment, Defendant's alleged role in it, and the charges against Defendant are known to the Court and the parties, and they are summarized in the Court's Order Denying Defendant's Motion to Dismiss. See United States v. Gross , 370 F.Supp.3d 1139, 1143 (C.D. Cal. 2019).
II. Defendant's Motion for Continuance
Defendant moves to continue the trial, currently set for February 25, 2020. He does so based on the volume of discovery, mostly electronically stored information ("ESI"), produced by the Government. As has been the Government's practice in a number of cases related to the present one, the Government has produced its entire file. In total, the parties estimate that over 6 million pages of documents and 1,600 audio recordings have been produced to Defendant. (See Doc. 96; Opp. at 3-4.) The vast majority (over 80%) of the documents and the audio recordings were produced to Defendant no later than November 23, 2018, over one year ago. (Id. at 6.) A comparatively small amount of discovery was produced in hard copy.
In August 2018, the Government advised defense counsel that it would make available in hard copy 27 boxes of IRS documents related to William Parker, and approximately 100 boxes of FBI documents related Paul Randall. (See Doc. 96, Opp. at Ex. E.) Without further identifying them, the defense states the Government has made available 200 boxes of hard copy documents. (See Doc. 100, Reply at 12.) In its supplemental materials, the defense states that it manually reviewed 200 boxes of documents. (Indeglia Decl. ¶ 9.)
In determining whether to grant Defendant's Motion to Continue, the Court must consider four factors: (1) the defendant's "diligence in his efforts to ready his defense prior to the [trial] date"; (2) the usefulness of the continuance; (3) the extent to which granting the continuance inconveniences the court, the government, and its witnesses; and (4) prejudice to the defendant as a result of the failure to grant a continuance. United States v. Flynt , 756 F.2d 1352, 1358-59 (9th Cir.), amended , 764 F.2d 675 (9th Cir. 1985). The weight attributed to any one factor may vary. Id. (citation omitted). "[T]he focus of [the] prejudice inquiry is the ‘extent to which the aggrieved party's right to present his defense [may be] affected.’ " United States v. Kloehn , 620 F.3d 1122, 1128 (9th Cir. 2010) (internal quotation marks and citation omitted).
The Court considers each factor.
A. Diligence
The defense team contends they have been diligently preparing for trial, but they have been hampered by the volume of data (most of which is irrelevant to the case against Defendant) and the many errors in data formatting. (Mot. at 6.) Below, the Court discusses these two considerations before turning to Defendant's supplemental filing.
1. Volume of Discovery
In this case, the Government has, by any standard, produced a massive amount of discovery. Therefore, any discussion of diligence must begin with the underlying premise, evident to all parties and to the Court, that a review of the discovery produced does not require counsel to manually review 6 million pages of documents. To be sure, "unaided by technology," counsel simply cannot review multiple "gigabytes or ... terabytes of data." Sean Broderick et al., Fed. Judicial Ctr., Criminal e-Discovery: A Pocket Guide for Judges 14 (2015) (hereinafter "Criminal e-Discovery "). Therefore, a variety of electronic searches are generally used both to identify relevant documents and to identify irrelevant and duplicate documents, which can then be culled from the data to be reviewed. (See Doc. 100, Reply at 4 (referring to "a variety of search strategies, including word searches, document searches, date searches, sender/recipient searches, concept searches, predictive coding searches, and negative searches"); Large Decl. ¶ 3 (stating that the declarant is experienced in "processing incoming productions and searching for relevant documents and culling nonresponsive documents"), id. ¶ 22 (stating that the declarant "remov[ed] swaths of non-relevant files by conducting searches that would return non-pertinent documents so that they could be culled").)
The Government's "open file" production of ESI is not unusual. Many courts have considered open file productions or policies in the context of the prosecutor's duty to produce exculpatory evidence under Brady v. Maryland , 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). Two Circuits have upheld an "open file" production in the face of challenge by the accused that such a voluminous production without specific identification of exculpatory evidence by the prosecution violates Brady . For instance, the Fifth Circuit, considering a production that far exceeded the present one, concluded that the government's duty to disclose generally does not include a "duty to direct a defendant to exculpatory evidence within a larger mass of disclosed evidence." United States v. Skilling , 554 F.3d 529, 576 (5th Cir. 2009) (considering "the government's open file, which consisted of several hundred million pages of documents"), rev'd in part on other grounds by Skilling v. United States , 561 U.S. 358, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010). The Sixth Circuit held similarly. See United States v. Warshak , 631 F.3d 266, 297-98 (6th Cir. 2010) (rejecting argument that "the government shrugged off its obligations under Brady by simply handing over millions of pages of evidence and forcing the defense to find any exculpatory information contained therein").
Both Skilling and Warshak were quick to point out that the prosecution's mere production of an open file consisting of millions of pages does not necessarily always meet its Brady obligations. In Skilling , the Court noted that the prosecution may not, consistent with Brady , simply "drop ... million[s of] pages on [a defendant's] doorstep." Skilling , 554 F.3d at 577. In Skilling , the court viewed favorably the facts that the open file production was "electronic and searchable," was accompanied by indices, and was accompanied by a "hot documents" file that identified documents the prosecution viewed as particularly relevant to the defense. Id. The Skilling court also discussed a number of actions in which the prosecution may not engage: Consistent with Brady , the prosecution may not deliberately conceal exculpatory material in the voluminous material, it may not "pad" its file with pointless information to increase the defendant's burden of reviewing the production, and it may not otherwise act in bad faith in carrying out its duties. Id. The Warshak court applied Skilling and also examined whether the government's open file production raised any of these concerns. Warshak , 631 F.3d at 297-98 ; see also United States v. Rubin/Chambers, Dunhill Ins. Servs. , 825 F. Supp. 2d 451, 455 (S.D.N.Y. 2011) ("The cases in this area tend to draw the same distinction: Absent prosecutorial misconduct—bad faith or deliberate efforts to knowingly hide Brady material—the Government's, use of ‘open file’ disclosures, even when the material disclosed is voluminous, does not run afoul of Brady .").
Here, there is no suggestion that the Government has engaged in any of the types of activities that might taint its admittedly voluminous production. Moreover, the Government's production was accompanied by indices identifying the documents by Bates-ranges (see Opp. Exs. A & F-H) and describing the audio recordings (see Opp. Exs. A & K-L.) Moreover, in June 2018, the Government produced two binders of material to Defendant, thus gathering and identifying its "key documents [expected to] make up the core of the government's case-in-chief at trial, including contracts, email messages, spreadsheets, highlights of covert recordings, summaries of payments, and key cooperating witness statements regarding defendant." (Opp. at 4.) On this record, there is nothing intrinsically unsettling about the voluminous production by the Government.
Thus, in terms of the volume of the evidence, the key considerations are: (1) the production consists almost exclusively of ESI, the vast majority of which—over 80% of the document production and all of the covert recordings in the investigatory file—was produced more than one year ago; (2) the ESI production has been supplemented by indices; and (3) the Government produced (seventeen months ago) its "key documents" regarding its case-in-chief.
2. Technical Issues
Defendant also points to technical problems with the ESI produced by the Government. ESI productions will almost always require some processing by the recipient before the data can be analyzed: "ESI generally takes one of two possible forms: preprocessed (raw) or postprocessed. Some raw ESI is not ready to be reviewed electronically; it must be processed into a digital file that can be loaded into document-review software." Criminal e-Discovery at 12 (footnote omitted). The need for raw data to be "processed" is not unusual, but it "is expensive and time-consuming." Id. at 8. Although the quality of ESI productions may vary, "[e]ven if the discovery is produced in an optimal way, defense counsel may still need expert assistance, such as litigation support personnel, paralegals, or database vendors, to convert e-discovery into a format they can use ... and to decide what processing, software, and expertise is needed to assess the ESI." Id. at 12 (footnote omitted).
"The term ‘processing’ usually involves formatting ESI so that the native file can be placed into a review platform where it can be viewed, culled, organized, searched, and analyzed." Id. at 8 n.20.
As of the date of the hearing on this Motion, defense counsel had previously contacted the Government to attempt to resolve technical difficulties with the ESI production only twice since receiving the first production over seventeen months earlier. (See Opp. at 15; Large Decl. ¶¶ 16-17, 20-21 & 27-29.) Both times, the defense encountered difficulties because the hard drive lacked sufficient free space to operate efficiently. This difficulty occurred because the Government included space-hogging encryption software along with the ESI. However, the parties have since made arrangements that obviates the need to include the encryption software on the drive. (See Opp. at 5 n.3, cf. Large Decl. ¶¶ 16-17 & 27 (referring to "overstuffed" hard drives).) Thus, in each instance where the defense alerted the Government to technical difficulties, those difficulties were resolved cooperatively and with the Government's assistance.
To the extent the defense has encountered other technical difficulties that it has not addressed with the Government, it cannot be heard to complain. The Supplemental Large Declaration (provided in camera ) outlines "the steps [he] would immediately take in order to get the defense team on track for trial." (Supp'l Large Decl. ¶ 37.) Thereafter, he provides a three-and-one-half-page list of those steps. (Id. ¶¶ 37(a)-(h).) This list merely underscores the existing lack of diligence in addressing the claimed technical deficiencies of the Government's production. Moreover, although the requirement that the Government act in good faith means that it cannot take steps to make its ESI production more unwieldy, to the extent that the Government produces ESI from third parties in the same format it was received, its duty of production is discharged.
(See, e.g. , Reply at 3-4 (identifying ten categories of ESI produced by the Government that the defense contends are "not searchable").)
Beyond the general parameters expressed in this Order, the Court expresses no opinion regarding the appropriateness of counsel's list of steps.
(See Opp. at 15 ("The government has the same production as defendant.").)
3. Defendant's Supplemental Materials
At the hearing on this matter, the Court authorized Defendant to file, in camera , supplemental materials related to a showing of diligence. Those materials were filed on November 22, 2019, and the Court has reviewed them. To be sure, counsel have spent hundreds of hours preparing a defense, but it is unclear how much of that time has been spent related to review of the Government's production.
By far the most time working on the Government's ESI production has been by William F. Large, who reports he has expended 436.9 hours. Although Attorney Large is not counsel of record in this case, he serves as a specialized expert in ESI management. His time in this case has been devoted exclusively to dealing with the Government's production, but it still appears that comparatively little time has been spent on actual review of the documents. (See Supp'l Large Decl. ¶ 34, (noting that 249.9 hours of 436.9 hours has been spent "processing, repairing and conducting quality control procedures" regarding the Government's ESI or preparing the ESI for searching rather than actual review of the ESI, while another 140 hours has been spent "sampling, culling, reviewing and [searching]" the ESI).) Counsel of record Mark Mermelstein and Mona Samir Amer have "spent a combined total of over 1,100 hours" on the defense, but no more than approximately ten per cent of that time has been spent reviewing discovery. (See Mermelstein Decl. ¶ 3.) Counsel of record Hamilton Arendsen, who has not maintained detailed billing records, states that he has "spent hundreds of hours working on this case," but his description of that work includes only the briefest of passing references to any review of discovery. (See Arendsen Decl. ¶ 4 (including the phrase "reviewing and analyzing discovery and conferring with co-counsel and other team members regarding problems with searching discovery and related issues" with seven other phrases describing how he has spent an estimated "hundreds of hours working on this case").)
The Court finds that the information summarized in this paragraph does not require in camera treatment.
To some extent, the fact that relatively little time has been spent reviewing the discovery could be explained by a desire to first process the data into its most usable form before analyzing it. However, that raises the same question as to why the defense has only twice over the course of seventeen months sought the Government's assistance in resolving technical issues. On this point, criticism of the quality of the Government's ESI does not in itself demonstrate diligence—it merely underscores the need for diligence. In sum, while the defense has made a showing that document review in this case is an enormous task, it has not shown diligence in undertaking that task to date.
Therefore, he Court finds the defense has not shown diligence in preparing for trial in this matter.
B. Usefulness
The defense has likewise done little to show that a continuance would serve its purported purpose. Defendant contends that "[a] trial continuance in this case, if granted, would serve an essential and not just useful purpose—allowing Dr. Gross and his counsel to attempt a thorough review of the Government's voluminous discovery." (Mot. at 6.) The Supplemental Large Declaration states best how the defense could put to use additional time. (See Supp'l Large Decl. ¶ 37(a)-(h).) However, because this proposal was raised in an untimely manner, and set forth in an in camera filing, the Government has had no opportunity to respond to this portion of the Declaration. Moreover, this proposal does not set forth information that needed to be presented to the Court in camera ; in fact, it is the very type of information that may have been helpful if discussed with the Government a year ago. Therefore, the Court does not consider it. As it stands, the majority of the Government's production was completed a year ago, and Defendant has failed to show that the trial continuance it seeks would serve a useful purpose.
C. Inconvenience to Others
Defendant is incorrect in stating that there is little inconvenience to others. (See Reply at 10 ("Third, the inconvenience to the Court and the parties is minimal. The current trial date is several months away, allowing the Court ample time to fill its calendar with other matters and giving the Government ample time to organize its witnesses.").) The Court has many cases set for trial in upcoming months, and those trial dates are set well in advance. It cannot easily move another trial to February, nor can it readily bump other trials set for later dates to make room for Defendant's case. Nonetheless, the Court does not give significant weight to this factor; if the other factors warrant it, inconvenience to the Court's calendar would not prevent a continuance.
D. Prejudice
Any discussion of prejudice must begin with the fact that there is still approximately three months before trial. It should also begin with the acknowledgement that whether Defendant will be prejudiced by the denial of a continuance is the most important factor to consider. See Flynt , 756 F.2d at 1359 ("[I]n order to obtain a reversal, appellant must show at a minimum that he has suffered prejudice as a result of the denial of his request.").
Defendant contends he will suffer prejudice in the form of "the inability to review the evidence the Government has produced to Dr. Gross in satisfaction of its discovery obligations." (Mot. at 7.) The prejudice argument is unpersuasive in light of Defendant's general lack of diligence in analyzing the production and, in particular, his failure to attempt to address the alleged data errors. Thus, Defendant has not shown any likelihood of prejudice as a result of the denial of a continuance.
E. Ruling on Motion to Continue
Thus, a weighing of the Flynt factors do not warrant a trial continuance. Therefore, the Court DENIES the Motion to Continue Trial to September 8, 2020.
Nevertheless, the Court finds reason to grant a shorter continuance. The Court has reviewed the in camera filing by the Government, and the Court notes, based thereon, that the Government anticipates producing additional documents. Moreover, the Court has taken into account the point raised by the defense in its in camera filing. (See Def.'s Further Submission at 3:9-4:4 & 4:19-5:6 (in camera ); Supp'l Mermelstein Decl. ¶¶ 10-11 (in camera ).) Combined, these facts suggest to the Court that a continuance of a shorter duration than that sought by the defense is appropriate. Therefore, the Court CONTINUES the trial in this matter to June 9, 2020, at 9:00 a.m.
The Court does not believe a continuance of this length is warranted, but as noted above, the Court's current trial calendar does not permit a continuance to an earlier date.
III. Government's Motion in Limine No. 1
In its first Motion in Limine, the Government moves to admit excerpts of seven covert audio recordings of conversations that included Defendant Gross. Draft transcripts of the audio recordings were attached. (Mot. Exs. A-O.) Defendant opposes on three grounds: First, the recordings are of poor quality and therefore unreliable and inadmissible; second, the recordings are impermissible Rule 404(b) "other acts" evidence; and finally, the recordings are excludable under Rule 403 as unfairly prejudicial. (Doc. 82, Opp. at 2.) Defendant also argues that he should be permitted to offer additional portions of the recordings to provide context to those portions offered by the Government. (Id. at 3.)
A. Quality of Transcripts
Although the draft transcripts of the covert recordings are less than optimal, the Court has reviewed the updated version, consisting of the audio recordings themselves with a rolling transcript on video. These were provided by the Government with the Reply. The Court finds these recordings are of good quality. There are, on occasion, overlapping conversations and unintelligible phrases, but the vast majority of the communications are easily heard and understood. Therefore, the quality of the recordings is not an impediment to their admission.
B. Rule 404(b) Evidence
Defendant next challenges the statements as impermissible "other acts" evidence. Federal Rule of Evidence 404(b)(1) makes inadmissible evidence of "crime[s], wrong[s], or other act[s]" to prove a person's character where such evidence is offered to prove that, "on a particular occasion[, that] the person acted in accordance with [his] character." Id. However, such "other acts" evidence is admissible to prove "motive, opportunity, intent, preparation, plan, knowledge, identity, the absence of mistake, or the lack of accident." Fed. R. Evid. 404(b)(2). Ninth Circuit case law applies a specific test regarding the admissibility of "other acts" evidence. To establish that "other acts" are being offered for a permissible purpose under Rule 404(b), "it is the government's responsibility to show that the evidence (1) proves a material element of the offense for which the defendant is now charged, (2) if admitted to prove intent, is similar to the offense charged, (3) is based on sufficient evidence, and (4) is not too remote in time." United States v. Ramirez-Robles , 386 F.3d 1234, 1242 (9th Cir. 2004).
Defendant identifies three categories of statements: 1) that Dr. Gross sought to perform surgeries at other hospitals in exchange for some type of improper remuneration; 2) that Dr. Gross sought or was paid alleged kickbacks for prescribing medical creams and referring patients for epidural injections ; and 3) that Dr. Gross professed a willingness to provide false testimony in depositions with regarding the nature of hospital fees. (Opp. at 8-9.)
All three categories are probative of Defendant's intent. As to the first two, evidence that Defendant was involved or sought to be involved in similar kickback schemes—whether the kickback scheme involved surgical referrals to other hospitals, referrals for injections to any facility, or for writing prescriptions for a particular medicine—is probative on the issue of whether he had the requisite intent as to the charged scheme. See United States v. Ricard , 922 F.3d 639, 653-54 (5th Cir. 2019) (finding no abuse of discretion in admitting evidence of similar, uncharged kickback scheme because evidence regarding the similar scheme was probative as to defendant's intent regarding the charged kickback scheme). The third category also implicates Defendant's intent, as his professed willingness to provide false testimony in unrelated expert depositions regarding the kickback payments tends to show that he understood that those payments were unlawful. (See Mot. at 8 n.5 (referencing Defendant's attempt at maintaining "plausible deniability" regarding the nature of the kickback payments).)
In applying the four-factor test described in Flynt , the first factor is met because the evidence tends to prove a material point. The second factor is also met because the first two categories of evidence are similar to the offense charged, and because the third category of evidence is not only similar, it directly implicates a planned cover-up of the offense charged. As to the third factor, the evidence is reliable, as it consists of Defendant's own statements. The fourth factor is met because the evidence is from the time period of the conspiracy charged in the Indictment. Therefore, the Court concludes that the categories of evidence to which Defendant objects are permissible under Federal Rule of Evidence 404(b)(2).
C. Rule 403 Balancing
Generally, Defendant challenges all the recordings (except for Defendant's specific statements regarding his contractual arrangements with Pacific Hospital) as inadmissible under Federal Rule of Evidence 403. (See Opp. at 11.) Rule 403 provides:
The court may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.
Defendant challenges four categories of evidence. First, Defendant challenges the admissibility of recordings about payment arrangement with other medical facilities, which the Government calls "Kickback Negotiation Evidence." (Opp. at 13-14; see generally Doc. 89, Reply at 4-11.) Second, Defendant challenges recordings regarding improper payments for referrals of patients who needed medical creams or epidural injections. (Opp. at 13-14.) Third, Defendant challenges recordings in which he discussed giving false testimony during depositions. (Opp. at 14.) Finally, Defendant challenges the admissibility of the recording of a particularly crude sexual analogy he makes to explain why he prefers payment arrangements involving personal injury liens rather than workers' compensation billing. (Opp. at 13.)
The first three recordings do not require exclusion under Rule 403. The starting point of the Rule 403 analysis is the probative value of the evidence sought to be excluded. The Kickback Negotiation Evidence is probative on the issue of whether Defendant had the requisite intent as to the charged scheme. (See Reply at 9 ("Indeed, the recordings provide contemporaneous evidence of defendant's mental state at the time of the charged offenses, and is [sic] therefore tremendously probative of key issues at trial.").) The same is true as to the referrals for injections or for writing prescriptions for a particular medicine. Moreover, Defendant's professed willingness to provide false testimony in unrelated expert depositions regarding the kickback payments is probative as to his understanding that the payments made to him were unlawful. Thus, these recordings are directly relevant to a material issue; indeed, the statements are particularly probative because they are statements made by Defendant regarding his state of mind, his knowledge, and/or his intent during the relevant time period.
If the starting point of the Rule 403 analysis is the probative value of the evidence sought to be excluded, the mid-point of that analysis is the nature of the balancing test that Rule 403 sets up. Rule 403's balancing test favors admission by requiring that the probative value of the evidence be "substantially outweighed" by the Rule 403 counterbalancing considerations: "unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence." The final part of the analysis is to apply this test.
Here, there is a danger of unfair prejudice in admitting evidence of the other kickback schemes. The jury may be tempted to convict Defendant based on his actions that are not charged in this case. Moreover, there is a danger that the jury may be confused regarding what crimes are charged in this case. This evidence, as well as Defendant's statements regarding false testimony, could lead the jury to conclude "that the defendant is a bad man deserving of punishment." (Opp. at 14 (internal quotation marks and citation omitted).) However, these are the types of risk that can be ameliorated by proper jury instructions. Moreover, because Defendant's intent, knowledge, and understanding are central to the charged offenses, the fact that much trial time may be devoted to that issue does not make the presentation of this evidence (or evidence presented by Defendant in response thereto) a waste of time. Therefore, the first three recordings do not require exclusion under Rule 403.
The final recording requires exclusion. The recording in which Defendant likens the "orgy" of personal injury lien recovery to the "anal sex without lubricant" of workers' compensation billing and eventual payment is not probative of any material issue. Instead, the recording establishes Defendant's desire to focus his practice on personal injury cases rather than workers' compensation cases and the reason behind this desire: Because personal injury cases are much more financially lucrative; that is, personal injury cases are an "orgy" of profit. The trouble with this analogy, apt as it may be, is that it is sexual in nature, it is unnecessarily crude, and it would likely be highly offensive to some (if not all) of the jurors if admitted; thus, it is highly inflammatory. Given its lack of probative value, this evidence presents a wholly unnecessary distraction that carries with it a danger of unfair prejudice. Accordingly, the Government may not offer those portions of Exhibit C which include this reference.
There is a possibility, however, that the probative nature of this evidence could increase if Defendant puts at issue the reason for Defendant's focus on personal injury cases instead of workers' compensation cases. (See Mot. at 17-18.) For instance, in Defendant's Opposition to the Government's Motion in Limine No. 2, he describes how he made referrals to personal-injury patients based on whether the hospital "accepted lien cases." (Doc. 83, Opp. to MIL No. 2 at 2.) Under such circumstances, Defendant's profit-based preference for personal injury cases becomes more relevant, and the Rule 403 balance may shift in a manner that causes the Court to reconsider its initial ruling at trial.
D. Rule of Completeness
Finally, Defendant notes that he would seek to introduce other portions of certain recordings pursuant to Federal Rule of Evidence 106. (Opp. at 16-17.) Rule 106, the rule of completeness, provides:
If a party introduces all or part of a writing or recorded statement, an adverse party may require the introduction, at that time, of any other part—or any other writing or recorded statement—that in fairness ought to be considered at the same time.
Fed. R. Evid. 106. Defendant's request lacks specificity, and therefore is not properly before the Court.
Moreover, Defendant misunderstands the scope of Rule 106. He may not offer other portions of recordings to show that he had no intent to financially harm or physically harm his patients. (See Opp. at 17.) Such recordings are admissible only if the part of the recording identified by Defendant "in fairness ought to be considered at the same time" as the portion offered by the Government. Fed. R. Evid. 106. The issue of Defendant's intent (or lack of intent) that his patients "suffer some detriment" such as "financial harm, physical harm, or some other negative consequence" is not an issue material to the charges against Defendant. (Opp. at 17; see infra section IV.) The rule of completeness is therefore unlikely to implicate such portions of the recordings.
Issues regarding hearsay will be resolved at trial, if necessary. (Compare Opp. at 17-18 (contending that Defendant's statements offered to prove his then-existing state of mind would be admissible under Rule 803) with Reply at 12 (deferring response to Defendant's argument in the absence of identification of portions of recordings to be offered by Defendant).)
The Court GRANTS IN PART AND DENIES IN PART the Government's Motion in Limine No. 1. With the exception of that portion of Exhibit C described above, the Government may offer as evidence at trial the recordings that are the subject of its Motion in Limine No. 1.
IV. Government's Motion in Limine No. 2
The Government moves to preclude evidence or argument that Defendant did not intend to harm his patients medically or financially, and that he instead intended only to help his patients obtain medically necessary and financially appropriate medical care. (Mot. at 1-2.) Specifically, the Government moves to preclude five categories of evidence:
(1) defendant did not intend to harm his patients, medically or financially; (2) defendant did not cause actual patient harm, medically or financially; (3) defendant intended to help his patients, medically and financially; (4) defendant performed medically-necessary spinal surgeries and/or provided high quality surgeries; and (5) patients received surgeries at a reasonable or discounted cost.
(Id. at 2.) Defendant opposes, arguing that the evidence is relevant to his intent to defraud.
As the Court has already held, the intent element of honest services fraud does not require any intent to cause tangible harm and may instead be met by proof that Defendant referred his patient to Pacific Hospital, received a kickback pursuant to the charged conspiracy in exchange for that referral, and failed to disclose that kickback to the referred patient. Gross , 370 F. Supp. 3d at 1146-49 (recognizing the "intangible rights" theory of fraud in private-sector honest services fraud). Thus, certain evidence that the Government calls the "Good Doctor" evidence and the "Patient Harm" evidence (see Doc. 91, Reply at 1-2) are not relevant to the issue of intent.
Importantly, however, the Government concedes that Defendant may offer evidence relating to "(a) why he referred patients to Pacific Hospital; (b) whether he understood that his financial arrangements with Pacific Hospital and affiliates were intended to influence his referral of patients (i.e., constituted a kickback or bribe); [and] (c) the materiality or importance of the financial arrangements to his patients." (See Reply 2.) Moreover, the Government concedes that because it intends to offer evidence that Defendant referred patients to Pacific Hospital in furtherance of a scheme to defraud, Defendant may then offer evidence that these referrals were made, not in furtherance of the scheme to defraud, but for other reasons. (Reply at 7-8 n.4.)
With these parameters in mind, the Court GRANTS IN PART the Government's Motion in Limine No. 2, and ORDERS that Defendant may not introduce evidence or argue that (1) he did not intend to harm his patients, medically or financially; and (2) that he did not cause actual patient harm, medically or financially. Categories (3)-(5) may be admissible, not as to Defendant's intent, but to counter the Government's evidence that Defendant referred patients to Pacific Hospital in furtherance of the scheme to defraud. (See Reply at 7-8 n.4.) Therefore, the Court reserves ruling on Motion in Limine No. 2 as to evidence and argument (3) related to defendant's intent to help his patients, medically and financially; (4) regarding the medical necessity and/or quality of the surgeries performed as a result of the referrals; and (5) whether the referred patients received surgeries at a reasonable or discounted cost.
V. Government's Motion in Limine No. 3
In its third Motion in Limine, the Government moves to admit testimony from cooperating medical professionals who entered into sham contracts that took the form of "a medical office sublease, an option agreement, and an Outsourced Collection Agreement." (Mot. at 1.) In proving its case against Defendant, the Government intends to offer evidence that Defendant entered into sham contracts that took similar forms. (See id. at 3-4 (describing evidence regarding an office sublease, option agreement and collection agreement).) The Government expects that Pacific Hospital executives will testify that these contracts were used to disguise kickbacks made to medical providers, including Defendant. (Id. at 5 & 10 (identifying Chief Financial Officer James Canedo as a witness).) Therefore, the Government moves to admit the testimony of three doctors that they entered into similar contracts with Pacific Hospital as a way to conceal kickback payments. (Id. at 5-8 (identifying Dr. Jacob Tauber (who would testify as to an office sublease), Dr. Philip Sobol (who would testify as to an option contract), and Dr. Alan Ivar (who would testify as to a collection agreement).) The Government contends that the cooperating doctors' testimony is relevant to providing background to the charged conspiracy, to proving elements of the charged conspiracy, to corroborate the expected testimony of former Pacific Hospital CFO Canedo, and to establish that the contracts relating to Gross were not legitimate contacts. (Id. at 8-12.)
Defendant contends the proffered testimony is not relevant because whether the cooperating doctors entered into sham contracts with Pacific Hospital has no bearing upon whether Defendant's contracts were legitimate. (Doc. 84, Opp. at 2-3.) Defendant focuses on the fact that the cooperating doctors cannot offer testimony regarding his intent in entering into his contracts with Pacific Hospital. (Opp. at 3-4.) Relatedly, Defendants argues that the Government has charged "a rimless hub-and-spoke conspiracy"; that is, Defendant argues that he and the cooperating doctors are actually charged with several separate conspiracies rather than a single overarching conspiracy. (Opp. at 1 & 5-7.) Even if relevant, Defendant contends the probative value of such evidence is substantially outweighed by considerations set forth in Federal Rule of Evidence 403 : unfair prejudice, confusion of the issues, waste of time, and misleading to the jury. (Opp. at 7-9.)
A. Relevance
Fundamentally, Defendant's arguments regarding relevance understate the broad scope of the conspiracy charged in of Count One of the Indictment. (See Doc. 1, Indictment at 1-29.) The Indictment alleges a broad conspiracy that implicates Defendant and many other medical providers. (See Indictment ¶¶ 23, 24(a)-(c), (h)-(i) & (k).) Specifically, the Indictment against Defendant Gross describes the manner and means of the conspiracy: Defendants charged in related cases, together with unindicted conspirators and Pacific Hospital, paid "kickbacks to defendant GROSS and other surgeons ... in exchange for patient-related referrals ... for spinal surgeries ... that would be billed to health care benefit programs or subject to personal injury claims and/or liens." (Id. ¶ 24(a).) The Indictment also charges that "[i]nfluenced by the promise of kickbacks, Pacific Hospital Kickback Recipients, including defendant GROSS, would cause patients ... to have Kickback Tainted Surgeries at Pacific Hospital and Affiliated Entities." (Id. ¶ 24(b).) More pointedly, here, the means and manner of the conspiracy also includes allegations that "[t]o conceal and disguise the kickback payments ... Pacific Hospital ... would enter into arrangements with Pacific Kickback Recipients, including defendant GROSS." (Id. ¶ 24(h).) "[T]hese arrangements would be reduced to written contracts, including, ... lease and rental agreements, option agreements, [and] collection agreements." (Id. ) "The written contracts would not specify that one purpose for the agreements would be to [induce referrals, or that] the compensation would be paid, entirely or in part ... to cause Pacific Kickback Recipients to refer Kickback Tainted Surgeries ... to Pacific Hospital." (Id. ¶ 24(i).) Given the breadth of the conspiracy charge, the sham contracts entered into by the cooperating doctors are highly relevant to the conspiracy charge against Defendant Gross.
The Government represents that Pacific Hospital executives and the cooperating doctors will testify regarding the existence of a kickback scheme and the manner in which it was carried out. It is expected that both the executives and the doctors will testify that they entered into written agreements that were meant to disguise the kickbacks as legitimate payments. These written agreements are similar to those into which Defendant entered with Pacific Hospital.
"Evidence is relevant if ... it has any tendency to make a fact more or less probable than it would be without the evidence; and ... the fact is of consequence in determining the action." Fed. R. Evid. 401(a)-(b). Certainly evidence that Pacific Hospital used written agreements to disguise kickback payments is relevant under this definition. The form these written agreements took are likewise relevant, especially if they are similar to those into which Defendant entered. Defendant appears to concede the relevancy of these two points, at least to the extent it is introduced through the executives rather than the cooperating doctors. But the testimony of the cooperating doctors as to the true purpose of these agreements is also relevant. As described, it corroborates the executives' testimony, and such testimony is relevant under Rule 401. United States v. Hankey , 203 F.3d 1160, 1171 (9th Cir. 2000) ("Evidence helpful in evaluating the credibility of a witness is of consequence to the determination of the action.").
(See Opp. at 5 ("[I]f the Government wishes to introduce evidence of PHLB's agreements with other doctors, it can do so through the testimony of ... executives who negotiated those agreements with those doctors ....").)
Defendant relatedly contends that the broad conspiracy charged should be treated instead as multiple, narrower conspiracies because the charged conspiracy is "a rimless hub-and-spoke conspiracy." At the hearing, Defendant relied on two cases not cited in their Opposition: Kotteakos v. United States , 328 U.S. 750, 755, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946) and United States v. Wassner , 141 F.R.D. 399 (S.D.N.Y. 1992). Neither of these cases deal with the relevance or admissibility of co-conspirator testimony.
In Kotteakos , the Supreme Court reversed the convictions of certain defendants because the district court failed to instruct the jury regarding multiple conspiracies. The Court discussed how, in a joint trial, to be convicted of a single conspiracy rather than multiple conspiracies, the defendants must share something in common that connects them other than the hub of the wheel of which they are all spokes. Id. Rather than just a single, central conspirator (the hub of the wheel) connecting all co-conspirators, something else must join the co-conspirators at the outside (or rim) of the wheel. Id. Otherwise, in a joint trial, the trial court must instruct regarding multiple conspiracies. Id. at 769-70, 66 S.Ct. 1239. In Kotteakos , the only connection between supposed conspirators was that they obtained loans through fraudulent means that passed through a common broker. Id. at 754-55, 66 S.Ct. 1239. The Kotteakos Court found this connection insufficient to sustain the convictions of multiple defendant-borrowers tried jointly on a single conspiracy. Id. at 755, 777, 66 S.Ct. 1239. The Court remanded with the caution that:
Here, ... extraordinary precaution is required, not only that instructions shall not mislead, but that they shall scrupulously safeguard each defendant individually, as far as possible, from loss of identity in the mass. Indeed, the instructions often become [a defendant's] principal protection against unwarranted imputation of guilt from others' conduct.
Id. at 776-77, 66 S.Ct. 1239.
The court in Wassner applied Kotteakos . 141 F.R.D. at 405. In Wassner , the defendants were charged with a conspiracy that involved two previously convicted co-conspirators. Id. at 400. These co-conspirators perpetrated a broad scheme whereby they would generate false invoices that assisted many other individuals in committing tax fraud by artificially inflating the expenses of their businesses. Id. at 400-01. The defendants were charged with purchasing such false invoices. Id. at 404. The co-conspirators refused to testify against the defendant, and the government therefore sought to introduce evidence regarding the co-conspirators' similar actions with other individuals. Id. at 404. The court noted the similarities between Kotteakos and the case before it, referring to the hub-and-spoke nature of the charged scheme before noting that the government's proffered evidence would be "proof of [only] the other spokes in the wheel." Id. at 405. Therefore, the court declined to decide relevance and instead held that such evidence, even if otherwise admissible, would be excluded pursuant to Federal Rule of Evidence 403, presumably as unfairly prejudicial. See id. at 405.
Neither of these cases are on point. The issue of separate conspiracies in Kotteakos arose only because the defendants were jointly tried, which is not the case here, and the issue arose only at the close of trial, not before or during the trial in connection with an evidentiary ruling. And Wassner presented a unique situation where testimony was unavailable due to the co-conspirators' refusal to testify, causing the government to attempt to prove its case by relying exclusively on evidence of other "spokes" from the same "hub," which was clearly highly prejudicial, suggesting guilt-by-association, and therefore excludable under Rule 403. These cases do not convince the Court that the cooperating doctors' testimony should be excluded as irrelevant in this case.
Thus, as argued by the Government, the cooperating doctors' testimony is relevant to providing background to the charged conspiracy, to proving elements of the charged conspiracy, to corroborate the expected testimony of former Pacific Hospital CFO Canedo, and to establish that the contracts relating to Gross were not legitimate contacts.
B. Rule 403 Balancing
Defendant's Rule 403 challenge is also unpersuasive. Under Rule 403,
The court may exclude relevant evidence if its probative value is substantially outweighed by a danger of one or more of the following: unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.
Fed. R. Evid. 403. The proffered testimony is highly relevant, and the balancing test requires that the Rule 403 issues "substantially outweigh[ ]" its probative value. Most applicable here is the danger of unfair prejudice, which in this context is the danger that a jury will find "guilt by association." (See Opp. at 8.) Relatedly, there is the consideration that a jury could be confused by the cooperating doctors' conduct versus Defendant's conduct. (See id. at 8.) None of these considerations substantially outweigh the probative value of the cooperating doctors' testimony. This is not a case where the Government seeks to rely solely on the guilt of others to prove its case against Defendant, thus differentiating this case from Wassner , where exclusion under Rule 403 was granted. Proper instructions to the jury will guard against unfair prejudice and confusion of the issues.
The Court GRANTS the Government's Motion in Limine No. 3, and ORDERS that the Government may present testimony from Dr. Jacob Tauber regarding his medical office sublease, from Dr. Philip Sobol regarding his option agreement, and from Dr. Alan Ivar regarding his Outsourced Collection Agreement.
VI. Conclusion
As set forth herein, the Court GRANTS IN PART Defendant's Motion to Continue. The trial is CONTINUED to June 9, 2020 at 9:00 a.m., and the pretrial status conference is CONTINUED to June 8, 2020 at 10:00 a.m. Defendant is ORDERED to appear.
The Court GRANTS IN PART the Government's Motion in Limine No. 1. The Government may offer as evidence at trial the recordings that are the subject of its Motion in Limine No. 1 except that portion of Exhibit C described above. The Motion is DENIED as to that portion of Exhibit C.
As set forth above, the Court GRANTS IN PART and reserves ruling in part as to the Government's Motion in Limine No. 2.
The Court GRANTS the Government's Motion in Limine No. 3.