United States v. David Dunham, Jr.

• Court: Court of Appeals for the Third Circuit
• Decided: July 20, 2021
• Docket: 20-2686
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 20-2686

UNITED STATES OF AMERICA

v.

DAVID M. DUNHAM, JR., Appellant ________________

Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Criminal Action No. 5-15-cr-00602-001) District Judge: Honorable Jeffrey L. Schmehl ________________

Argued on June 3, 2021

Before: AMBRO, HARDIMAN, and PHIPPS, Circuit Judges

(Opinion filed: July 20, 2021)

Shon Hopwood [Argued] Kyle Singhal Ann M. Hopwood Hopwood & Singhal 1701 Pennsylvania Avenue, N.W., Suite 200 Washington, DC 20006 Counsel for Appellant

Jennifer Arbittier Williams Robert A. Zauzmer Mary E. Crawley Office of United States Attorney 615 Chestnut Street Suite 1250 Philadelphia, PA 19106

Jennifer S. Neumann John Smeltzer Jean E. Williams Adam C. Cullman Thekla Hansen-Young [Argued] United States Department of Justice Environment & Natural Resources Division P.O. Box 7415 Washington, DC 20044 Counsel for Appellee

OPINION*

AMBRO, Circuit Judge

A jury found David Dunham Jr. guilty on various counts of fraud, false tax filings,

and obstruction. The convictions were in connection with using his alternative fuels

businesses to obtain improper subsidies, grants and tax credits. Dunham appeals, arguing

that the District Court should have dismissed his indictment because the Government

engaged in outrageous misconduct by inviting him to attend three proffer meetings

despite being aware of a potential conflict of interest affecting his then-attorney. In the

alternative, he argues the Court should have held an evidentiary hearing to explore this

issue. As the outrageous government misconduct defense is reserved for only the most

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent.

2 egregious circumstances, and Dunham’s allegations, even if true, do not meet that high

bar, we reject his arguments and affirm his convictions.

I.

For over two decades, Dunham made his living in the alternative fuels industry.

He first founded Smarter Fuel, Inc. on his own, and then in 2010 launched Greenworks

Holdings, LLC with codefendant Ralph Tommaso. The businesses were billed as green

energy enterprises. Among other things, they collected, processed, and resold used oil

from restaurants. Through his businesses, Dunham took advantage of various federal

programs run by the Environmental Protection Agency, Internal Revenue Service, and

U.S. Department of Agriculture—in the form of subsidies, grants and tax credits—

intended to incentivize the production of alternative fuels. The intricacies of these

programs are complex, but (as Dunham acknowledges) they “are not in dispute” in this

appeal. Dunham’s Br. at 7.

Since its inception, Greenworks paid Michael McAdams, a Washington lobbyist,

for consulting services regarding tax credits and other regulatory issues. App. A8, Dist.

Ct. Op. at 2. McAdams had a law degree but never practiced as an attorney, though in

2011 he joined the law firm Holland & Knight (“H&K”) as a “Senior Policy Advisor.”

App. A195. Dunham hired H&K to provide “legal services in connection with fuel

regulatory support” to Greenworks, with McAdams “lead[ing]” the team. App. A192–

93; Dist. Ct. Op. at 2.

In July 2012, the Government, as part of an investigation, executed search

warrants of Dunham’s businesses and home. Based on McAdams’ recommendation,

3 Dunham hired John Brownlee, a white-collar criminal defense partner at H&K. Dist. Ct.

Op. at 2. Although McAdams and Brownlee were in the same law firm, and thus

Brownlee may have been inclined to shield McAdams and the firm from liability,

Brownlee never obtained a conflict waiver from Dunham. He asserts Brownlee

encouraged him to negotiate a plea deal. Based on that advice, Dunham agreed to attend

proffer meetings with the Government. Before those meetings, he signed a letter

including the standard acknowledgment that, if he ever testified at trial, “the

[G]overnment may cross-examine [him], introduce rebuttal evidence and make

representations based on [proffered] statements,” which “helps to assure [Dunham] does

not abuse the opportunity for an ‘off-the-record’ proffer . . . [and] make materially false

statements.” App. A205.

Dunham attended three proffer meetings on July 9, 2013, December 5, 2013, and

January 2, 2014. He now argues that the Government believed he revealed damning

information at these meetings he would not have revealed with conflict-free counsel. For

example, Dunham allegedly admitted he “was not adding diesel to his product as was

required under the terms of the USDA program.” Dunham’s Br. at 17–18 (citing App.

A210).

Following the third meeting, the Government asked him to acknowledge in writing

that there may be a conflict of interest due to Brownlee and McAdams’ membership in

the same law firm. Dunham refused and hired new counsel.

In December 2015, the Government charged Dunham with various counts of

conspiracy, false statements, wire fraud, false tax filings and obstruction, some of which

4 were later dismissed on the Government’s motion. At a high level, the indictment alleged

that Dunham and Tommaso defrauded the federal government of tax credits and grant

monies. Dist. Ct. Op. at 1–2. Prior to trial, Dunham’s new counsel moved to dismiss the

indictment, arguing that the Government improperly exploited Brownlee’s alleged

conflict of interest. The District Court denied the motion without an evidentiary hearing.

It further granted the Government’s motion in limine, thus allowing the Government to

introduce statements made by Dunham during the proffer sessions to rebut any

contradictory statements made by him at trial. App. A22.

Following a sixteen-day jury trial, the jury convicted Dunham on all but one

count. The District Court sentenced him to eighty-four months of imprisonment. Suppl.

App. 606–14. He appeals his convictions to us.1

II.

When reviewing a district court’s decision on a motion to dismiss an indictment,

we review its legal conclusions anew and its factual findings for clear error. United

States v. Voigt, 89 F.3d 1050, 1064 (3d Cir. 1996). Dunham argues that the indictment

should be dismissed because the Government committed outrageous misconduct by

exploiting Brownlee’s alleged conflict of interest. Dunham’s Br. at 25.

Since 1952, the Supreme Court has recognized “that outrageous misconduct by

law enforcement officers in detecting and obtaining incriminating evidence could rise to

the level of a due process violation.” Voigt, 89 F.3d at 1064 (citing Rochin v. California,

1 The District Court had jurisdiction over this criminal matter under 18 U.S.C. § 3231. We have appellate jurisdiction under 28 U.S.C. § 1291. 5 342 U.S. 165 (1952)). As the descriptors indicate, that bar is very high, as the conduct

must be “‘so outrageous’ as to be ‘shocking to the universal sense of justice.’” United

States v. Lakhani, 480 F.3d 171, 177–78 (3d Cir. 2007) (quoting United States v. Russell,

411 U.S. 423, 431–32 (1973)). Moreover, the defendant, and not the Government, bears

“both the burden of production and persuasion.” Voigt, 89 F.3d at 1070. Although our

Court continues to recognize the existence of the outrageous misconduct doctrine, it is

reserved for “only the most intolerable government conduct.” Id. at 1065 (emphasis in

original) (quoting United States v. Jannotti, 673 F.2d 578, 608 (3d Cir. 1982)). We

previously remarked that “courts have rejected its application with almost monotonous

regularity,” see id. (quoting United States v. Santana, 6 F.3d 1, 4 (1st Cir. 1993)), and

that its “viability . . . is hanging by a thread,” see United States v. Nolan-Cooper, 155

F.3d 221, 230 (3d Cir. 1998). Indeed, we have identified only one instance of outrageous

misconduct, more than forty years ago in United States v. Twigg, 588 F.2d 373 (3d Cir.

1978), where the Government’s behavior bordered on entrapment.

Here, Dunham’s allegations ask us to consider when the Government’s

interference with an attorney-client relationship results in a constitutional claim of

outrageous misconduct. In Voigt, we set out a three-prong test, requiring the defendant to

show “(1) the government’s objective awareness of an ongoing, personal attorney-client

relationship . . . ; (2) deliberate intrusion into that relationship; and (3) actual and

substantial prejudice.” 89 F.3d at 1067.2

2 Alternatively, Dunham claims we can conclude the Government’s conduct was outrageous because it undermined the “fundamental fairness” of the proceedings. 6 Even if we accept Dunham’s allegations as true, they do not come close to

satisfying the three prongs of Voigt. Under the first prong, the Government must have

been objectively aware of an actual conflict of interest afflicting Dunham’s counsel,

Brownlee. See United States v. Kossak, 178 F. App’x 183, 186 (3d Cir. 2006). At the

outset, we are not convinced an actual conflict existed at all. To establish it, Dunham

must demonstrate Brownlee “actively represented conflicting interests” that “adversely

affected his [] performance.” Strickland v. Washington, 466 U.S. 668, 692 (1984)

(quoting Cuyler v. Sullivan, 446 U.S. 335, 350 (1980)). McAdams was never prosecuted

or investigated for misconduct, nor did the Government ever call him as a material

witness. Further, testimony at trial suggests that Dunham hid his unlawful activity from

McAdams. See, e.g., Suppl. App. 191–95. Even if McAdams or H&K had criminal

exposure, Brownlee would have had the incentive to protect, rather than betray, Dunham,

because implicating him could have increased suspicion of McAdams. Put another way,

McAdams’ interests were aligned with rather than divergent from Dunham’s own.

As for the second prong, the Government’s actions fall well short of being a

“deliberate intrusion.” Its behavior here is more akin to “passive tolerance” (which is

permissible) than “active encouragement of impropriety” (which is cause for concern).

Voigt, 89 F.3d at 1066. “We are aware of no authority . . . imposing an affirmative duty

Dunham’s Br. at 49. We decline to analyze this argument separately, as it seeks an unnecessary and duplicative inquiry. “Fundamental fairness” is simply a shorthand for the Supreme Court’s explanation that outrageous misconduct must violate “fundamental fairness, [and be] shocking to the universal sense of justice.” Voigt, 89 F.3d at 1065 (quoting Russell, 411 U.S. at 432). 7 on the Government to inform a suspect that he has a potential conflict of interest with his

attorney.” Kossak, 178 F. App’x at 186. Further, unlike in Voigt where only the

Government was aware of the conflicting interests (as it was secretly using the

defendant’s attorney as an informant), Dunham had all the information to assess whether

there was an actual conflict. Voigt, 89 F.3d at 1062–63.

Finally, Dunham fails to show the Government’s misconduct actually and

substantially prejudiced him. He essentially argues that he said too much at the proffer

sessions, and that if he were represented by conflict-free counsel, he would have kept

quiet or not participated at all. But even without the proffer meetings, the Government

could have elicited the same testimony from Dunham on cross-examination. The

Government’s case was further supported by twenty witnesses and ample documentary

evidence. Suppl. App. 406, 409–10. In any event, Dunham never explains how

Brownlee led him astray. At no point did he allege that Brownlee asked him not to

mention McAdams or to provide untrue testimony to protect McAdams and H&K. See

Voigt, 89 F.3d at 1070 (holding there is no prejudice when the defendant “does not cite

even a single occasion on which [his attorney] gave him legal advice that was calculated

to damage him to the benefit of the government”).

Even accepting Dunham’s allegations as true, we conclude that there is no

outrageous misconduct justifying dismissal of the indictment. As a result, we also reject

his argument that the District Court abused its discretion by not holding an evidentiary

hearing. See United States v. Scripps, 961 F.3d 626, 631–32 (3d Cir. 2020) (explaining

the standard of review). Dunham is entitled to such a hearing only if he raised a

8 “colorable claim.” Voigt, 89 F.3d at 1067 (quoting United States v. Brink, 39 F.3d 419,

424 (3d Cir. 1994)).3 For the reasons explained above, he did not.

* * * * *

A defense of outrageous government misconduct is disfavored and burdens the

defendant with a typically insurmountable bar. Dunham falls well short here. We thus

affirm his conviction.

3 We also reject Dunham’s assertion that the District Court should have held an evidentiary hearing to explore whether his lawyer’s purported conflict of interest prevented Dunham from knowingly and voluntarily waiving his rights under Fed. R. Crim P. 11(f) and Fed. R. Evid. 410 by signing the proffer agreement, which allowed the Government to use his proffered statements against him if he provided conflicting testimony at trial. This argument is not colorable because, as noted above, Dunham did not adequately allege a conflict of interest. See United States v. Mezzanatto, 513 U.S. 196, 210 (1995) (“[A]bsent some affirmative indication that the agreement was entered into unknowingly or involuntarily, an agreement to waive the exclusionary provisions of the plea-statement Rules is valid and enforceable.”). 9