In the Courts

Applying the Savings Clause

The government's original indictment charged the Defendants' with participating in a dual-object conspiracy: conspiring to violate the CAA and conspiring to defraud the United States. Relying in part on Yates v. United States, 354 U.S. 298 (1957), the Defendants moved to dismiss the CAA object of the conspiracy because the indictment failed to allege an overt act in furtherance of that object within the statute of limitations. W.R. Grace, 2007 WL 2728767, at *2.The district court agreed, holding that the overt acts within the statute of limitations alleged in the indictment related only to the obstruction object of the conspiracy and dismissed the CAA object as time barred. Id. Two weeks after the district court's order, the government obtained a superseding indictment, which added allegations that the overt acts within the statute of limitations were in furtherance of both the obstruction and CAA objects of the conspiracy. Id. In response to the Defendants' motion, the district court dismissed the CAA object of the conspiracy alleged in the superseding indictment as time-barred and not protected by the savings clause of 18 U.S.C. ' 3288. (18 U.S.C. ' 3288 provides: 'Whenever an indictment or information charging a felony is dismissed for any reason after the period prescribed by the applicable statute of limitations has expired, a new indictment may be returned ' within six calendar months of the date of the dismissal of the indictment or information ' which new indictment shall not be bared by any statute of limitations. This section does not permit the filing of a new indictment or information where the reason for the dismissal was the failure to file the indictment or information within the period prescribed by the applicable statute of limitations, or some other reason that would bar a new prosecution.') The Ninth Circuit held that '[i]f the indictment is filed within six months of the dismissal order, ' 3288 does not bar the government from filing a superseding indictment: the savings clause of ' 3288 permits amendment when the original was structurally flawed but timely filed.' Id. at *3 (citing United States v. Clawson, 104 F.3d 250 (9th Cir. 1996)). The court's holding turned on the distinction 'between a timely filed, but flawed, indictment, to which the savings clause of ' 3288 does apply, and an untimely indictment, to which it does not.' Id. at *4. 'As long as the original indictment is filed within the statute of limitations and charges the same crime, based upon approximately the same facts charged in the superseding indictment, ' 3288 allows the government to file a superseding indictment within six months.' Id. at *5. The parties did not dispute that the original indictment was filed within the statute of limitations. Id. Because the superseding indictment charged the same dual-object conspiracy based on approximately the same facts, adding only allegations of overt acts in furtherance of the obstruction object, the court reversed the district court's order dismissal of the CAA object of the conspiracy and reinstated that portion of the charge. Id.

Looking to Alleged Business Knowledge to Define 'Asbestos' Under the Clean Air Act

The second important issue the Ninth Circuit decided related to the parties' cross motions in limine to exclude evidence that fell outside their respective definitions of the term 'asbestos.' The knowing endangerment provision of the CAA prohibits in part the knowing release into the ambient air any hazardous air pollutant listed under 42 U.S.C. ' 7412 where the person knows at the time that he thereby places another person in imminent danger of death or serious bodily injury. 42 U.S.C.
' 7413(c)(5)(A). Section 7412, part of the CAA's civil regulatory scheme, lists 'asbestos' among other hazardous air pollutants. Id. ' 7412(b). The district court held that the term 'asbestos' had no inherent meaning and therefore its use in the CAA's criminal provisions violated the Rule of Lenity and the Due Process Clause of the Fourteenth Amendment. W.R. Grace, 2007 WL 2728767, at *6. The district court therefore limited 'asbestos' to include only the six minerals listed under the EPA's civil regulatory definition of 'asbestos' and excluded the vast majority of the government's evidence of asbestos releases because it related to minerals outside the EPA's civil regulatory definition. Id.

The Ninth Circuit held that 'it was well known that asbestos has a common meaning; it is a fibrous, non-combustible compound that can be composed of several substances, typically including magnesium.' d. at *7. And although the government had not yet proven any facts at trial, the court concluded that 'the defendants had actual notice ' of the risks from the fibrous content of the asbestiform minerals in their products.' Id. Because the 'Defendants are an industrial chemical company and seven of its top executives,' they 'knew or should have known that their mining, milling, and distribution activities risked the release of asbestos into the ambient air.' Id. Because of this 'clear statutory language' and the Defendants' 'knowledge of the industrial chemicals field,' the court held that the district court misdefined the term 'asbestos' and erred in invoking the Rule of Lenity. Id.

The Ninth Circuit's holding is notable for its reliance, at least in part, on the Defendants' alleged business knowledge as evidence that the term 'asbestos' was clearly defined in the CAA's criminal provisions.

In the Courts and Business Crimes Hotline were written by Audrey L. Harris, Associate Editor of this newsletter and an associate at Kirkland & Ellis LLP, Washington, DC, and associate Peter Farrell.

Ninth Circuit Weighs in on Saving Time-Barred Indictments

In United States v. W.R. Grace, No. 06-30472, 06-30524, 2007 WL 2728767 (9th Cir. Sept. 20, 2007), the United States Court of Appeals for the Ninth Circuit held in part that: 1) a timely filed but structurally flawed indictment may, in many situations, be amended after the statute of limitations has expired, even if all or part of the indictment was dismissed as time barred; and 2) a term in a criminal statute may be defined in part based on the defendants' specialized, subjective business knowledge. In a complex opinion, these two issues stand out for their potential application in other business crimes and enforcement matters.

The Ninth Circuit's interlocutory opinion and the government's superseding indictment arose out of W.R. Grace's now-closed vermiculite mine near Libby, MT. The United States Attorney for the District of Montana successfully sought an eight-count indictment charging W.R. Grace and seven of its current or former employees (collectively, the 'Defendants') with: 1) one count of conspiring to violate the Clean Air Act ('CAA') and conspiring to defraud the United States in violation of 18 U.S.C. ' 371; 2) three counts of knowing endangerment under the CAA in violation of 42 U.S.C. ' 7413(c)(5)(A); and 3) four counts of obstruction of justice in violation of 18 U.S.C. ” 1505 and 1515(b). Id. at *1. After the United States District Court for the District of Montana granted a series of the Defendants' pre-trial motions, the government filed an interlocutory appeal concerning, among other orders, (the government also appealed the district court's order denying of the government's motion to exclude evidence related to a CAA affirmative defense and three orders excluding certain evidence and expert testimony) the district court's: 1) dismissal of the CAA object of the conspiracy charge and 2) definition of asbestos and exclusion of evidence inconsistent with that definition. Id.

Applying the Savings Clause

The government's original indictment charged the Defendants' with participating in a dual-object conspiracy: conspiring to violate the CAA and conspiring to defraud the United States. Relying in part on Yates v. United States , 354 U.S. 298 (1957), the Defendants moved to dismiss the CAA object of the conspiracy because the indictment failed to allege an overt act in furtherance of that object within the statute of limitations. W.R. Grace, 2007 WL 2728767, at *2.The district court agreed, holding that the overt acts within the statute of limitations alleged in the indictment related only to the obstruction object of the conspiracy and dismissed the CAA object as time barred. Id. Two weeks after the district court's order, the government obtained a superseding indictment, which added allegations that the overt acts within the statute of limitations were in furtherance of both the obstruction and CAA objects of the conspiracy. Id. In response to the Defendants' motion, the district court dismissed the CAA object of the conspiracy alleged in the superseding indictment as time-barred and not protected by the savings clause of 18 U.S.C. ' 3288. (18 U.S.C. ' 3288 provides: 'Whenever an indictment or information charging a felony is dismissed for any reason after the period prescribed by the applicable statute of limitations has expired, a new indictment may be returned ' within six calendar months of the date of the dismissal of the indictment or information ' which new indictment shall not be bared by any statute of limitations. This section does not permit the filing of a new indictment or information where the reason for the dismissal was the failure to file the indictment or information within the period prescribed by the applicable statute of limitations, or some other reason that would bar a new prosecution.') The Ninth Circuit held that '[i]f the indictment is filed within six months of the dismissal order, ' 3288 does not bar the government from filing a superseding indictment: the savings clause of ' 3288 permits amendment when the original was structurally flawed but timely filed.' Id. at *3 (citing United States v. Clawson , 104 F.3d 250 (9th Cir. 1996)). The court's holding turned on the distinction 'between a timely filed, but flawed, indictment, to which the savings clause of ' 3288 does apply, and an untimely indictment, to which it does not.' Id. at *4. 'As long as the original indictment is filed within the statute of limitations and charges the same crime, based upon approximately the same facts charged in the superseding indictment, ' 3288 allows the government to file a superseding indictment within six months.' Id. at *5. The parties did not dispute that the original indictment was filed within the statute of limitations. Id. Because the superseding indictment charged the same dual-object conspiracy based on approximately the same facts, adding only allegations of overt acts in furtherance of the obstruction object, the court reversed the district court's order dismissal of the CAA object of the conspiracy and reinstated that portion of the charge. Id.

Looking to Alleged Business Knowledge to Define 'Asbestos' Under the Clean Air Act

The second important issue the Ninth Circuit decided related to the parties' cross motions in limine to exclude evidence that fell outside their respective definitions of the term 'asbestos.' The knowing endangerment provision of the CAA prohibits in part the knowing release into the ambient air any hazardous air pollutant listed under 42 U.S.C. ' 7412 where the person knows at the time that he thereby places another person in imminent danger of death or serious bodily injury. 42 U.S.C.
' 7413(c)(5)(A). Section 7412, part of the CAA's civil regulatory scheme, lists 'asbestos' among other hazardous air pollutants. Id. ' 7412(b). The district court held that the term 'asbestos' had no inherent meaning and therefore its use in the CAA's criminal provisions violated the Rule of Lenity and the Due Process Clause of the Fourteenth Amendment. W.R. Grace, 2007 WL 2728767, at *6. The district court therefore limited 'asbestos' to include only the six minerals listed under the EPA's civil regulatory definition of 'asbestos' and excluded the vast majority of the government's evidence of asbestos releases because it related to minerals outside the EPA's civil regulatory definition. Id.

The Ninth Circuit held that 'it was well known that asbestos has a common meaning; it is a fibrous, non-combustible compound that can be composed of several substances, typically including magnesium.' d. at *7. And although the government had not yet proven any facts at trial, the court concluded that 'the defendants had actual notice ' of the risks from the fibrous content of the asbestiform minerals in their products.' Id. Because the 'Defendants are an industrial chemical company and seven of its top executives,' they 'knew or should have known that their mining, milling, and distribution activities risked the release of asbestos into the ambient air.' Id. Because of this 'clear statutory language' and the Defendants' 'knowledge of the industrial chemicals field,' the court held that the district court misdefined the term 'asbestos' and erred in invoking the Rule of Lenity. Id.

The Ninth Circuit's holding is notable for its reliance, at least in part, on the Defendants' alleged business knowledge as evidence that the term 'asbestos' was clearly defined in the CAA's criminal provisions.

In the Courts and Business Crimes Hotline were written by Audrey L. Harris, Associate Editor of this newsletter and an associate at Kirkland & Ellis LLP, Washington, DC, and associate Peter Farrell.