United States v. Habegger ( 2004 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA, 
Plaintiff-Appellee,
v.
LARRY FRICKE HABEGGER, a/k/a Larry  No. 03-4473
Frick Habegger, a/k/a Harry Frick
Habegger,
Defendant-Appellant.

Appeal from the United States District Court
for the Middle District of North Carolina, at Greensboro.
Frank W. Bullock, Jr., District Judge.
(CR-01-465; CR-02-351)
Argued: May 4, 2004
Decided: June 7, 2004
Before WILKINS, Chief Judge, DUNCAN, Circuit Judge, and
Bobby R. BALDOCK, Senior Circuit Judge of the
United States Court of Appeals for the Tenth Circuit,
sitting by designation.
Reversed and remanded with instructions by published opinion. Chief
Judge Wilkins wrote the opinion, in which Judge Duncan and Senior
Judge Baldock joined.
COUNSEL
ARGUED: William Carlton Ingram, Jr., Assistant Federal Public
Defender, OFFICE OF THE FEDERAL PUBLIC DEFENDER,
2 UNITED STATES v. HABEGGER
Greensboro, North Carolina, for Appellant. Michael Francis Joseph,
Assistant United States Attorney, OFFICE OF THE UNITED
STATES ATTORNEY, Greensboro, North Carolina, for Appellee.
ON BRIEF: Louis C. Allen, III, Federal Public Defender, Greens-
boro, North Carolina, for Appellant. Anna Mills Wagoner, United
States Attorney, Greensboro, North Carolina, for Appellee.
OPINION
WILKINS, Chief Judge:
Larry Fricke Habegger appeals his conviction and sentence for traf-
ficking in counterfeit goods, see 18 U.S.C.A. § 2320 (West 2000 &
Supp. 2004). Because there is insufficient evidence to establish the
"trafficking" element of this offense, we reverse Habegger’s convic-
tion and remand with instructions.
I.
Habegger owns Sox-4-U, a clothing business in Troy, North Caro-
lina. In 1999, Larry McKenzie, who owns a clothing business in
Asheboro, North Carolina, purchased 30,000 to 40,000 Nike T-shirts
from Habegger. After McKenzie resold the T-shirts, he was notified
by Nike’s trademark attorneys that the shirts were counterfeit. As part
of a settlement, McKenzie paid Nike $16,700—the total profit he had
made on the shirts.
In July 2001, Habegger contacted McKenzie and offered to sell
him some Adidas T-shirts. McKenzie notified the trademark attorneys
for Adidas (the same attorneys who represented Nike in connection
with the earlier counterfeit shirts) and, in cooperation with them and
United States Customs agents, arranged a purchase of the Adidas
shirts. One of Habegger’s employees, Dennis Thompson, delivered
samples of Adidas T-shirts to McKenzie. After reviewing the sam-
ples, McKenzie agreed to purchase approximately 12,600 T-shirts,
subject to Habegger providing proof that the shirts were authentic.
Habegger later sent McKenzie a copy of an Adidas invoice as proof
of authenticity. In September 2001, Rodney Spears, an associate of
UNITED STATES v. HABEGGER 3
Habegger who was in the clothing business in New Jersey, shipped
the T-shirts to McKenzie. Customs agents subsequently seized the
shirts. Meanwhile, Thompson and Habegger began calling McKenzie
daily demanding payment. Following a conversation with Habegger
and Spears, McKenzie sent a letter to them indicating that payment
would be made by September 25. However, no payment was ever
made.
On September 26, 2001, Customs agents executed a search warrant
at Sox-4-U. While the agents were there, UPS arrived to pick up a
package. Before the package left the premises, the agents learned that
it was being sent to Spears; they then seized the package and opened
it. The package contained 24 pairs of socks, including 12 pairs with
Eddie Bauer labels attached—labels that were later determined to be
counterfeit. Habegger told the agents that he was sending the socks
to Spears "as examples of samples that [Habegger] could provide to
him." J.A. 87.
In addition to observing thousands of socks in the Sox-4-U ware-
house, the agents discovered approximately 12,500 additional Eddie
Bauer sock labels in the Sox-4-U offices. Habegger informed the
agents that he had purchased the labels from an unidentified individ-
ual "off the back of a pickup truck." Id. at 92. Habegger also stated
that he "didn’t see a problem with putting those labels on generic
socks that he had at his warehouse." Id. at 95. However, when the
agents showed him one of the labels and pointed out the trademark
designation, Habegger responded that "we don’t use these at our
warehouse." Id. (internal quotation marks omitted). The agents later
learned that the labels were printed, without authorization from Eddie
Bauer, by a North Carolina printing company and that they were
printed for a company that had conducted business with Habegger.
Habegger was subsequently indicted on two counts of trafficking
in and attempting to traffic in counterfeit goods, see 18 U.S.C.A.
§ 2320. Count One charged that Habegger trafficked in and attempted
to traffic in 12,600 counterfeit Adidas T-shirts. Count Two alleged
that Habegger trafficked in and attempted to traffic in 12 pairs of
counterfeit Eddie Bauer socks (the socks he was sending to Spears).
Following a jury trial, Habegger was acquitted on Count One but con-
victed on Count Two. The district court sentenced Habegger to 19
4 UNITED STATES v. HABEGGER
months imprisonment. Further, because the court determined that
Habegger’s offense violated his probation for a previous conviction
for trafficking in counterfeit goods, the district court revoked that pro-
bation and imposed an additional consecutive term of seven months
imprisonment.
II.
Habegger contends that the evidence is insufficient to support his
conviction. In considering a sufficiency challenge, our role is limited
to considering whether "there is substantial evidence, taking the view
most favorable to the Government, to support" the verdict. Glasser v.
United States, 315 U.S. 60, 80 (1942). We must bear in mind that
"[t]he jury, not the reviewing court, weighs the credibility of the evi-
dence and resolves any conflicts in the evidence presented, and if the
evidence supports different, reasonable interpretations, the jury
decides which interpretation to believe." United States v. Murphy, 35
F.3d 143, 148 (4th Cir. 1994) (citation omitted). Reversal for insuffi-
cient evidence is reserved for cases in which "the prosecution’s fail-
ure is clear." Burks v. United States, 437 U.S. 1, 17 (1978).
Habegger was convicted of violating 18 U.S.C.A. § 2320(a), which
prohibits "intentionally traffic[king] or attempt[ing] to traffic in goods
or services and knowingly us[ing] a counterfeit mark on or in connec-
tion with such goods or services." To convict Habegger under this
provision, the Government was required to prove that he "(1) traf-
ficked or attempted to traffic in goods or services; (2) did so inten-
tionally; (3) used a counterfeit mark on or in connection with such
goods and services; and (4) knew the mark was counterfeit." United
States v. Giles, 213 F.3d 1247, 1249 (10th Cir. 2000); accord United
States v. Sultan, 115 F.3d 321, 325 (5th Cir. 1997).
Habegger argues only that the Government failed to prove the first
element—that he "trafficked or attempted to traffic" in the 12 pairs of
counterfeit socks. For purposes of § 2320, Congress provided that
"the term ‘traffic’ means transport, transfer, or otherwise dispose of,
to another, as consideration for anything of value, or make or obtain
control of with intent so to transport, transfer, or dispose of." 18
U.S.C.A. § 2320(e)(2) (emphasis added). Habegger contends that no
evidence shows that he was sending the counterfeit socks to Spears
UNITED STATES v. HABEGGER 5
"as consideration for anything of value"; rather, the evidence demon-
strates that Habegger was providing the socks as samples, for which
Spears had not promised payment or anything else in return. We
agree.
In this context, "consideration" means "[s]omething of value (such
as an act, a forbearance, or a return promise) received by a promisor
from a promisee." Black’s Law Dictionary 300 (7th ed. 1999). For an
act to constitute consideration, it must be "bargained for," that is,
"sought by the promisor in exchange for his promise and . . . given
by the promisee in exchange for that promise." Restatement (Second)
of Contracts § 71(1)-(2) (1981). Habegger notes that the only evi-
dence presented at trial regarding his or Spears’ understanding of the
shipment of socks was Habegger’s statement to the Customs agents
that he was sending the socks to Spears "as examples of samples that
[Habegger] could provide to him." J.A. 87. The Government essen-
tially agrees with this characterization of the evidence, conceding that
"there is no evidence of payment for the twelve pairs of socks." Br.
for Appellee at 12. Still, the Government argues that based on evi-
dence of an existing business relationship between Habegger and
Spears, the jury could reasonably conclude that Habegger was send-
ing the sample socks "to maintain the good will of Mr. Spears." Id.
The Government asserts that Habegger’s "desire . . . to please a val-
ued customer would be a thing of value which would support the con-
viction." Id. (citing United States v. Koehler, 24 F.3d 867, 871 (6th
Cir. 1994) (holding that a defendant who provided counterfeit labels
and containers to an undercover agent in exchange for a continuing
supply of other counterfeit items received "a thing of value" in the
form of the agent’s "good will" (internal quotation marks omitted))).
The problem with the Government’s argument is that, regardless of
whether Habegger intended to "please" Spears by sending him the
sample socks, there is no evidence that Spears promised to do any-
thing in connection with the socks. See Restatement (Second) of Con-
tracts § 72 cmt. a (1981) (explaining that consideration "requires an
element of exchange"). For example, no evidence indicates that
Spears had promised to pay for the socks, to buy additional socks if
he found the samples acceptable, or even to examine the socks and
consider purchasing more. Indeed, there is no evidence of any com-
6 UNITED STATES v. HABEGGER
munication between Habegger and Spears regarding the shipment of
socks.
The Government argues that the separate transaction involving
Adidas T-shirts demonstrates an existing business relationship
between Habegger and Spears. But that evidence, without more,
establishes at most that Habegger was sending the sample socks to
Spears hoping that he would place an order for a shipment of socks.
Even if a potential order constitutes a "thing of value," the evidence
fails to show that Habegger was sending the socks to Spears "as con-
sideration for" such an order. For a shipment of goods to constitute
consideration, there must be more than a mere hope on the part of the
sender that the recipient will purchase goods in the future. See id. § 71
cmt. b, illus. 2 (explaining that when one party gratuitously sends
goods to a second party and the second party later promises to pay for
the goods, there is no consideration for that promise, even if the first
party "secretly hope[d]" that the second party would pay for the
goods, at the time the gift was made). Rather, consideration must be
the subject of an existing agreement. See id. § 71(1)-(2). Because
there is no proof of any agreement between Habegger and Spears
regarding the sample socks, the evidence is insufficient to show that
Habegger was sending those socks to Spears as consideration for
something of value.1
1
As noted above, the Government cites Koehler, in which the Sixth
Circuit upheld a conviction under § 2320 because the defendant supplied
counterfeit items to an undercover agent "in exchange for [the agent’s]
‘good will’ and . . . such ‘good will’ constituted a thing of value." Koe-
hler, 24 F.3d at 871. But unlike the present case, in Koehler there was
apparently evidence of an agreement (at least implicitly) between Koe-
hler and the agent that Koehler would "provide[ ] the counterfeit labels
and containers in exchange for [the agent] providing him with a continu-
ing supply of counterfeit air conditioner compressors," id.; see id. at 868.
Moreover, the arguments and analysis in Koehler focused on whether
Koehler received "anything of value" for the counterfeit items he sup-
plied, see id. at 870-71; the Sixth Circuit did not specifically address
whether Koehler provided the items "as consideration for" something of
value.
In addition, the Government apparently contends that the evidence is
sufficient to convict Habegger of attempting to traffic in other counterfeit
UNITED STATES v. HABEGGER 7
III.
For the reasons set forth above, we conclude that the evidence fails
to prove an essential element of the offense of conviction: that Habeg-
ger "traffic[ked] or attempt[ed] to traffic" in the counterfeit socks, 18
U.S.C.A. § 2320(a). We therefore reverse Habegger’s conviction and
remand to the district court with instructions to enter a judgment of
acquittal on Count Two.2
REVERSED AND REMANDED WITH INSTRUCTIONS
socks, based on the thousands of socks and unattached labels found at
Sox-4-U. See Br. for Appellee at 11 (arguing that Habegger was sending
the 12 pairs of socks to Spears "as samples of what could be provided"
and that this shipment "constitutes a substantial step toward the comple-
tion of the crime"). This argument, however, overlooks that Habegger
was not charged with attempting to traffic in socks other than those con-
tained in the shipment to Spears. Count Two of the indictment specifi-
cally alleged that Habegger "intentionally did traffic and attempt to
traffic in goods, that is, approximately 12 pairs of socks." J.A. 11
(emphasis added).
2
Because we reverse Habegger’s conviction, we do not address his
arguments concerning sentencing.