United States v. Milheiser, No. 21-50162 (9th Cir. 2024)
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Six defendants were convicted of mail fraud and conspiracy to commit mail fraud for their sales companies' tactics in selling printer toner. The government's case was based on the argument that a representative from the sales company would call a business, falsely imply that the sales company was the business's regular supplier of toner, and falsely state that the price of toner had increased. The representative would then state that the business could lock in the old price by purchasing more toner that day. The defendants argued that this theory of fraud was overbroad because it permitted the jury to convict even though all of the businesses received the toner they ordered at the agreed price.
The case was heard in the United States District Court for the Central District of California, where the defendants were found guilty on all counts. The defendants appealed their convictions, arguing that the government's theory of fraud was overbroad.
The United States Court of Appeals for the Ninth Circuit agreed with the defendants, holding that the government's theory of fraud was overbroad because it did not require the jury to find that the defendants deceived customers about the nature of the bargain. The court vacated the defendants' convictions and remanded the case back to the lower court.
Court Description: Criminal Law. The panel vacated six defendants’ convictions for mail fraud and/or conspiracy to commit mail fraud arising from the defendants’ sales companies’ tactics in selling printer toner, and remanded.
The thrust of the Government’s case was that a sales company representative would call a business, falsely imply that the sales company was the business’s regular supplier of toner, and falsely state that the price of toner had increased.
The representative would then state that the business could lock in the old price by purchasing more toner that day.
The Government argued, and the jury was instructed, that if the defendants had made a misrepresentation that would be expected to and did cause a business to part with money, that constituted fraud. The defendants argued that this theory of fraud was overbroad because it permitted the jury to convict even though all of the businesses received the toner they ordered at the agreed price.
The panel explained that not just any lie that secures a sale constitutes fraud; the lie must instead go to the nature of the bargain. The panel held that the Government’s theory of fraud in this case was overbroad because it did not require the jury to find that the defendants deceived customers about the nature of the bargain. The Government did not argue that any error in this regard was harmless, and the panel concluded that the criteria for considering harmlessness sua sponte were not satisfied.
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