United States v. Shannon Drake ( 2023 )

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 21-4242
UNITED STATES OF AMERICA,
Plaintiff – Appellee,
v.
SHANNON MICHELLE DRAKE,
Defendant – Appellant.
Appeal from the United States District Court for the Middle District of North Carolina at
Greensboro. William L. Osteen, Jr., District Judge. (1:16−cr−00205−WO−2)
Argued: January 27, 2023 Decided: March 31, 2023
Before GREGORY, Chief Judge, WILKINSON, and HEYTENS, Circuit Judges.
Affirmed by published opinion. Judge Wilkinson wrote the opinion, in which Chief Judge
Gregory and Judge Heytens joined.
ARGUED: Claire J. Rauscher, WOMBLE BOND DICKINSON (US) LLP, Charlotte,
North Carolina, for Appellant. Gregory Schaffer Knapp, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: David A.
Hubbert, Deputy Assistant Attorney General, S. Robert Lyons, Chief, Criminal Appeals &
Tax Enforcement Policy Section, Katie S. Bagley, Joseph B. Syverson, Tax Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Sandra J. Hairston,
United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Greensboro,
North Carolina, for Appellee.
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WILKINSON, Circuit Judge:
Shannon Drake seeks an award of attorney’s fees under the Hyde Amendment, Pub.
L. No. 105-119, § 617, 111 Stat. 2440, 2519 (1997) (codified at 18 U.S.C. § 3006A note),
following the district court’s dismissal of the government’s criminal case against her. She
argues that her prosecution satisfied the Hyde Amendment’s criteria for fee shifting
because it was vexatious, frivolous, and in bad faith. She also requests discovery to support
her claim. The district court denied discovery and denied attorney’s fees based on its review
of the evidence available to the government when it initiated Drake’s prosecution. The
appeal here challenges the district court’s exercise of discretion at every turn. Because we
think the district court acted within its discretion throughout, we shall affirm the judgment.
I.
A.
This appeal arises out of the prosecution of Bruce Gregory Harrison III for tax
crimes and bank fraud. Harrison, who owned a temporary-staffing business in North
Carolina named Compensation Management, Inc. (CMI), was convicted of tax crimes
resulting from his failure to pay payroll taxes on behalf of his employees. See United States
v. Harrison, 541 F. App’x 290, 291–92 (4th Cir. 2013). Harrison instead used the withheld
payments for personal expenses to fund his lifestyle. Id.Harrison also engaged in a “factoring” loan scheme involving funding that he and
companies controlled by him received from GrandSouth Bank in South Carolina. In a
factoring arrangement, companies sell their accounts receivable (debts owed to them by
their customers) to a “factor,” often a bank. In exchange, the factor loans the company a
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cash advance that is repaid over time as the factor collects the accounts receivable. The
factor typically charges interest and receives a commission.
The factoring scheme involved Harrison establishing certain “nominee” companies
that appeared on paper to be controlled by other individuals but were actually controlled
by him. GrandSouth factored accounts receivable “under the false pretense” that it “would
be factoring the accounts receivables of the Nominee Companies when, in fact, the
Nominee Companies did no staffing business, had no actual receivables, and the invoices
being factored belonged to CMI.” J.A. 115. The factoring loans were paid to the nominee
companies but were ultimately directed back to Harrison. Harrison’s contacts at
GrandSouth were Douglas Corriher, head of the factoring department, and Shannon Drake,
the employee who managed Harrison’s factoring loans.
After Harrison’s trial for payroll-tax fraud, a grand jury investigated GrandSouth’s
banking practices in connection with Harrison’s factoring arrangements. The investigation
developed evidence that GrandSouth officers and employees helped Harrison use his
nominee companies to circumvent legal lending limits on the amount that GrandSouth
could loan to any single borrower. Harrison wanted a credit line of about $10 million,
which greatly exceeded the legal limit. So Harrison and GrandSouth entered several
smaller factoring agreements, each in the name of a company nominally controlled by one
of Harrison’s associates but actually controlled by Harrison, which collectively exceeded
the legal limit. GrandSouth did not disclose Harrison’s interest in these arrangements to
bank examiners.
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Drake’s role in this scheme was more than tangential. As the district court later
found, she was “involved in or in fact administratively executed many of the criminal
transactions.” Id. at 6609–10. She was responsible for reviewing account credit limits and
communicated directly with CMI. Drake routinely made entries into GrandSouth’s records
that were “material and, for the most part . . . false” because they concealed Harrison’s
interest in the factoring arrangements. Id. at 6618. The entries indicated that accounts
receivable and factoring loans were associated with the nominees when they in fact
belonged to Harrison and CMI. They did not reflect the “true nature of the [nominee
companies’] corporate officers and structure” and “reflected distributions to and for the
benefit of the nominee companies when in fact those distributions were often made to, and
for the benefit of, Harrison.” Id.Two GrandSouth employees testified before the grand jury about how Drake helped
Corriher conceal the fraudulent nature of Harrison’s factoring loans. 1 One of Drake’s
coworkers, C.G., testified that Drake and Corriher had a “very” close working relationship
and often discussed Harrison’s factoring arrangements. Id. at 4542–43. C.G. testified that
after Corriher became aware of an investigation, he directed Drake “to pull every single
1
We refer to grand jury testimony only to the extent necessary for public
understanding of the decision’s rationale. “[P]ublic access” to judicial proceedings
“promotes not only the public’s interest in monitoring the functioning of the courts but also
the integrity of the judiciary.” Doe v. Pub. Citizen, 749 F.3d 246, 266 (4th Cir. 2014).
Shielding judicial reasoning “from public view makes the ensuing decision look more like
a fiat and requires rigorous justification.” Id. (quotation marks omitted). While Fed. R.
Crim. P. 6(e) protects grand jury secrecy, it gives courts “substantial discretion,” Douglas
Oil Co. v. Petrol Stops Nw., 441 U.S. 221, 223 (1979), to “authorize disclosure” of grand
jury material “in connection with a judicial proceeding,” Fed. R. Crim. P. 6(e)(3)(E).
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box of all those staffing companies and pile them up and shred them. . . . [t]he less hands
that touch these files, the better.” Id. at 4544. C.G. observed Drake shredding those
documents in a “hush-hush” manner. Id. at 4545. Another coworker, Y.S., testified that the
wire transfer form that Drake used for Harrison’s factoring loans differed from
GrandSouth’s standard form because it listed multiple recipients, and that some of the
practices related to Harrison’s accounts appeared improper. Id. at 4608–09, 4618–20.
Relevant here, Drake testified before the grand jury earlier in its investigation. At the
time, the government advised her that she was “purely a factual witness” and not a target
or subject of the investigation. Id. at 4727–28. Drake was represented by the same law firm
that represented GrandSouth, which would have been a potential conflict of interest had
she been considered a target. But unbeknownst to Drake, AUSA Frank Chut had sent an
email to investigating agents several weeks earlier that stated:
We need to decide if we want to treat Shannon Drake as a target. . . . [S]he
was an essential cog in [the loan factoring scheme] and was well aware that
these loans were a nominee arrangement. It would help us to get her an
attorney of her own. Give her a break in response for full testimony or make
her eat a false entry on bank books charge (venue issues aside)?
Id. at 4290 (emphasis added). The North Carolina State Bar filed an ethics complaint
against Chut in connection with this incident that remains pending.
B.
In June 2017, the grand jury charged Drake and Corriher with conspiracy, bank
fraud, and misapplication of bank funds related to Harrison’s factoring loans. Corriher
pleaded guilty to conspiracy and agreed to cooperate. Corriher admitted that he helped
Harrison “circumvent” federal lending limits by extending factoring loans to the nominee
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companies. Id. at 6613. Corriher “was aware that [Harrison] was not paying over millions
in payroll taxes . . . [and] that a borrower’s unpaid payroll taxes generally constitute a grave
risk to the lender,” but Corriher “continued making advances on the factoring loans . . .
because the fund of unpaid payroll taxes also served to enrich [the bank] by enabling
[Harrison] to repay his loan.” Id. at 6613–14. “The bank was able to collect high rates of
interest on the loan advances along with lucrative fees.” Id. at 6614. An August 2017
superseding indictment charged Drake and two other GrandSouth officers with bank fraud,
misapplication of bank funds, and multiple conspiracies to make materially false bank-
record entries—including those concealing lending-limit violations and the fact that some
of Harrison’s accounts receivable were uncollectible.
Before trial, Drake moved to dismiss the indictment and suppress her grand jury
testimony because the government inaccurately told her she was neither a subject nor a
target. The government then voluntarily produced AUSA Chut’s email described above.
The district court held that “it is reasonable to conclude that Ms. Drake and her counsel
were readily misled by a representation that Ms. Drake was neither a target nor a subject
of the investigation.” Id. at 806. But the court did not suggest that “the prosecutor went so
far as to intentionally commit these acts or to intentionally mislead.” Id. at 808. It denied
Drake’s motion to dismiss because any misrepresentation was harmless, particularly given
that the government did not plan to introduce Drake’s grand jury testimony at trial.
As the district court recognized, Drake’s conduct was right at the edge of being a
jury question. At trial, the government produced evidence that Drake made and directed
materially false entries in GrandSouth’s books and records related to Harrison’s scheme.
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But there was less evidence presented as to whether Drake knew the entries were false such
that she acted with a culpable mens rea. The government did elicit testimony that the wire
request form that Drake used for Harrison’s accounts differed from the standard
GrandSouth form because it had extra space for additional authorization signatures. See id.at 2503–04 (testimony of Catherine Smith), 2993 (testimony of Cyndy Ayers). But the
district court refused to allow the government to ask several other witnesses whether
GrandSouth’s factoring arrangement with Harrison deviated from standard practice. See,
e.g., id. at 1091–93. Moreover, the government did not call C.G. or Y.S. as witnesses.
At the close of the government’s case, Drake moved for a Fed. R. Crim. P. 29
acquittal, arguing that there was insufficient evidence of any fraudulent intent to conceal
Harrison’s interest in the factoring arrangements or circumvent the bank’s lending limit.
The court granted acquittal on all counts. On the one hand, Drake’s “participation in
transactions related to these fraudulent schemes [was] substantial,” as she “was
[Harrison’s] account representative” and signed many of the fraudulent documents. Id. at
3907–08. But the court’s review of the trial evidence showed that “knowledge and intent
[were] significant issues”: There was “no evidence presented that anyone within the
factoring department had or gave . . . Drake any reasonable basis upon which to suspect
the companies were fake or that Drake ignored any obvious red flags,” and there was no
“sufficient basis upon which a jury could find that Drake even had subjective knowledge
or suspicion that information that she was . . . logging into the systems was false.” Id. at
3908–11.
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Still, the court recognized that its ruling on the sufficiency of the evidence as to
some of the counts was a “closer call.” Id. at 3910. It acknowledged the possibility it had
“made mistakes in evidentiary rulings,” and stated that it “would have been compelled” to
deny Drake’s Rule 29 motion had the government presented testimony from C.G. at trial.
Id. at 3912–13. Finally, the court “commend[ed] counsel for the Government for the
manner in which they prosecuted this case.” Id. at 3913.
C.
After her acquittal, Drake moved for attorney’s fees and expenses pursuant to the
Hyde Amendment. She asserted that her prosecution satisfied the statute’s criteria because
it was vexatious, frivolous, and in bad faith: The government (1) advanced “an erroneous
legal theory to treat nominee lending as inherently fraudulent,” (2) “made multiple
inaccurate statements . . . about the nature of their prosecution” and “withheld exculpatory
evidence,” and (3) misrepresented to Drake that she was not a target or subject of the
investigation. Id. at 6607–08. She also moved for discovery, requesting information related
to the government’s decisions to prosecute her and not to call C.G. and Y.S. at trial.
The district court denied both motions and held that the government’s case was not
vexatious, frivolous, or in bad faith. To begin, there “was certainly probable cause to
believe Drake’s actions satisfied the actus reus of 18 U.S.C. § 1005 [making false entries
in bank records]”: Drake made entries that were materially false in that they did not reflect
Harrison’s role as the true owner of the nominee companies and beneficiary of the factoring
loans. Id. at 6618. While there was not substantial evidence admitted at trial as to Drake’s
mens rea—whether she “knew the entries were false and acted with the necessary intent”—
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the government still had probable cause based on other evidence it had uncovered. Id. at
6618–19, 6622. C.G.’s grand jury testimony about Drake’s shredding of files was
“circumstantial evidence of knowledge of fraud and intent to defraud.” Id. at 6622–23.
Based on this testimony and “evidence of Drake’s substantial participation in the
transactions at issue,” the “Government rightly concluded . . . that the evidence supported
a finding of probable cause.” Id. at 6623. The prosecution was therefore not “vexatious or
‘groundless.’” Id. (quoting In re 1997 Grand Jury, 215 F.3d 430, 436 (4th Cir. 2000)).
Drake also failed to establish bad faith. The court found that Drake did not identify
any “specific exculpatory evidence” that the government should have provided, and the
government was not obligated to provide her with an assessment of the weight of the
evidence against her. Id. at 6625–26. The government’s inaccurate statement that Drake
was not a target of the investigation was harmless because her testimony was never used
at trial, and she identified no “legal harm she suffered as a result of [her attorneys’] alleged
conflicts of interest.” Id. at 6629–30. The court therefore declined to award attorney’s fees.
Finally, the court denied discovery, concluding that the Hyde Amendment’s text
does not provide for it. Id. at 6631 (citing United States v. Schneider, 395 F.3d 78, 92 (2d
Cir. 2005)). But even if it did have discretion to order discovery, the court held that Drake
had not made a sufficient “showing suggesting that the Government pursued the charges
for an improper purpose, in violation of the Hyde Amendment.” Id. at 6632. The court
found “no basis to conclude further discovery is required” given the “previously thorough
and comprehensive discovery and presentation of evidence.” Id. at 6633.
Drake timely appealed.
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II.
The Hyde Amendment provides that a district court “may award” attorney’s fees to
a prevailing defendant in a criminal case if “the court finds that the position of the United
States was vexatious, frivolous, or in bad faith, unless the court finds that special
circumstances make such an award unjust.” 111 Stat. at 2519. The position of the United
States is “vexatious” if the prosecution was “without reasonable or probable cause or
excuse.” In re 1997 Grand Jury, 215 F.3d at 436 (quotation marks omitted). “A frivolous
action is groundless . . . with little prospect of success; often brought to embarrass or annoy
the defendant.” Id. (quotation marks omitted). Finally, “bad faith is not simply bad
judgment or negligence, but rather it implies the conscious doing of a wrong because of
dishonest purpose or moral obliquity; . . . it contemplates a state of mind affirmatively
operating with furtive design or ill will.” Id. (quotation marks omitted). The claimant bears
the burden of establishing at least one of these elements, and we have characterized that
burden as a “daunting obstacle” because “a lot more is required . . . than a showing that the
defendant prevailed” in her criminal case. Id. (quoting United States v. Gilbert, 198 F.3d
1293, 1299, 1302 (11th Cir. 1999)).
In addition to the daunting obstacle imposed by the statute, we review a district
court’s decision to deny a Hyde Amendment motion only for abuse of discretion. Id. A
district court abuses its discretion if its decision “is guided by erroneous legal principles or
rests upon a clearly erroneous factual finding.” Westberry v. Gislaved Gummi AB, 178 F.3d
257, 261 (4th Cir. 1999) (citation omitted).
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Review of the district court’s decision under the deferential abuse-of-discretion
standard is particularly fitting in this context. The language of the Hyde Amendment allows
for attorney’s fees “where the court finds that the position of the United States was
vexatious, frivolous, or in bad faith.” 111 Stat. at 2159 (emphasis added). As the Supreme
Court has recognized, “[t]his formulation . . . emphasizes the fact that the determination is
for the district court to make, and thus suggests some deference to the district court upon
appeal.” Pierce v. Underwood, 487 U.S. 552, 559 (1988).
Moreover, questions like this one are “determination[s] that, as a matter of sound
administration of justice,” the district court “is better positioned than” an appellate court to
make. Id. at 559–60 (quotation marks omitted). Whether the government’s position was
vexatious, frivolous, or in bad faith “will turn upon . . . what was the evidence regarding
the facts,” and the district court, by virtue of its unique position managing the case prior to
and during trial, “may have insights not conveyed by the record[] into such matters as
whether particular evidence was worthy of being relied upon.” Id. at 560. Because the
district court is more familiar with the parties’ litigation conduct and the strength of the
government’s case, it is especially well-situated to determine whether a prosecution was
vexatious, frivolous, or in bad faith. We therefore afford it substantial discretion in deciding
Hyde Amendment claims.
The district court here acted well within its discretion when it concluded the
prosecution was not vexatious, frivolous, or in bad faith.
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A.
To begin, the district court correctly concluded that the prosecution was supported
by probable cause. It was therefore not vexatious or frivolous. Contrary to Drake’s
suggestion, the court did not find probable cause based solely on the fact that Drake was
indicted. Rather, the court assessed all the evidence available to the government when it
decided to prosecute and held that the “Grand Jury and the Government rightly concluded
. . . that the evidence supported a finding of probable cause.” J.A. 6623 (emphasis added).
In determining whether there was probable cause for Hyde Amendment purposes,
it was proper for the district court to consider the entirety of the evidence available to the
government when it decided to prosecute. The court was not limited to evidence admitted
at trial. As the First Circuit has recognized, in Hyde Amendment cases “the court must
assess the basis for pursuing charges from the perspective of the government at the time”
it made that decision. United States v. Knott, 256 F.3d 20, 35 (1st Cir. 2001). The statute
uses the past tense—whether the government’s position “was vexatious, frivolous, or in
bad faith,” 111 Stat. at 2519 (emphasis added)—which suggests that we must evaluate the
government’s position given the evidence available to it when it decided to prosecute. We
agree that the “government was entitled to rely on its evidence so long as it had a good-
faith basis for contending that the evidence was admissible,” because an “interpretation of
the Hyde Amendment which effectively requires the government precisely to anticipate
later evidentiary rulings, where reasonable grounds for disagreement exist, is untenable in
light of [the statute’s] language and purposes.” Knott, 256 F.3d at 35–36.
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Given all the evidence available to the government when it decided to prosecute
Drake, the prosecution was supported by probable cause. There was clearly probable cause
with respect to the actus reus for the charged crimes. As the district court found, Drake
made materially false entries in GrandSouth’s books and records. The entries did not
accurately reflect that “distributions to and for the benefit of the nominee companies” were
actually “made to, and for the benefit of, Harrison” and that “the factoring lines were
secured with receivables which were not actually owned or controlled by those nominee
companies, but instead by Harrison.” J.A. 6618.
With respect to Drake’s mens rea—her knowledge of her entries’ falsity or
fraudulent intent to evade legal lending limits—there also was enough evidence to provide
probable cause for her prosecution. The grand jury testimony of C.G., one of Drake’s
coworkers, that Drake surreptitiously shredded documents related to Harrison’s staffing
companies is the strongest evidence of Drake’s culpable mens rea. C.G. testified that Drake
said that “she shredded the files at the direction of Corriher [the head of GrandSouth’s
factoring department], after Corriher became aware of the investigation into the staffing
companies.” Id. at 6622. Drake wanted someone else to do the shredding, but Corriher told
her that “[t]he less hands that touch these files, the better.” Id. (quotation marks omitted).
This testimony, which the grand jury found credible enough to provide probable cause,
supports the proposition that Drake knew of and knowingly participated in the fraud.
It is true that the government ultimately chose not to call C.G. at trial due to potential
credibility issues given the circumstances of her termination from GrandSouth and
uncertainty regarding the scope of cross-examination that the district court would allow.
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But the government was still entitled to rely on C.G.’s grand jury testimony when
determining whether there was probable cause to prosecute Drake. See Knott, 256 F.3d at
35. The government could have believed in good faith that C.G.’s testimony would be
admitted at trial and that it could successfully limit any damaging cross-examination.
Indeed, the district court stated that had the government presented testimony from C.G., it
“would have been compelled” to deny Drake’s Rule 29 motion and allow the case to go to
the jury, which presumably could have assessed C.G.’s credibility and decided to believe
her. J.A. 3913. C.G.’s sworn grand jury testimony therefore supported the view that Drake
acted with a culpable mens rea notwithstanding the government’s later decision not to call
her at trial.
In addition to C.G.’s testimony, other evidence available to the government
supported probable cause. Two GrandSouth employees, Catherine Smith and Cyndy
Ayers, testified at trial that Drake used a wire transfer form for Harrison’s accounts that
had a “bottom part . . . added for additional signatures” that “wasn’t typical.” Id. at 2504;
see id. at 2993. A third employee, Y.S., testified before the grand jury about Drake’s
unusual practices with respect to Harrison’s accounts, explaining that she never saw other
“wires with multiple clients’ names on it” and that it would not “be proper to lend to a
nominee or fictitious entity.” Id. at 4609–11. And Drake was familiar with the relationship
between Harrison and the nominees, with emails showing her joking about all Harrison’s
“freakin’ accounts” and directing CMI’s clients to wire funds to the nominees’ accounts.
Id. at 2926–28, 5561.
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Drake’s use of abnormal forms and procedures, her knowledge of the nominee
arrangements, and her creation of materially false records that concealed Harrison’s role in
the factoring loans constituted in their totality probable cause to conclude that Drake knew
her entries furthered a fraudulent scheme. See United States v. Bales, 813 F.2d 1289, 1294
(4th Cir. 1987) (“Fraudulent intent may be established by circumstantial evidence and by
inferences deduced from facts and situations.”); United States v. Krepps, 605 F.2d 101, 109
(3d Cir. 1979) (“[A] jury may plausibly have determined that Krepps intended to deceive
. . . when he omitted from the bank records any reference to his being the beneficiary of
the loan.”).
Finally, the fact that the district court granted Drake a Rule 29 acquittal does not
undermine the proposition that the government’s case was supported by probable cause. A
Rule 29 acquittal does not require a grant of attorney’s fees. The fact that Drake was
acquitted means only that there was not sufficient evidence admitted at trial to prove her
guilt beyond a reasonable doubt. See Fed. R. Crim. P. 29(a). Whether there was probable
cause to conclude she committed a crime is, of course, a different and less demanding
standard. See Illinois v. Gates, 462 U.S. 213, 235 (1983). And, as explained above, courts
must determine whether the government had probable cause given all the potentially
admissible evidence available to it when it decided to prosecute, not just the evidence
actually admitted.
In fact, the court’s statements with respect to the Rule 29 motion support a finding
of probable cause here. The court characterized its Rule 29 holding with respect to charges
related to the false entries as a “closer call” because the evidence could “potentially form[]
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a basis for a finding by a jury of a willful blindness.” J.A. 3910. If it was a close call
whether a jury could find Drake guilty beyond a reasonable doubt based solely on the trial
evidence, then it is likely the government had probable cause given all the available
evidence. Moreover, the trial court’s statement that it “would have been compelled to let
this case go forward” had the government presented C.G.’s testimony implies that given
that testimony, a jury could have found Drake guilty beyond a reasonable doubt. Id. at
3913. Given the district court’s familiarity with the facts, we will not lightly contradict its
judgment.
In sum, the government’s prosecution of Drake was plainly not “vexatious.” In re
1997 Grand Jury, 215 F.3d at 436. Probable cause likewise negates the possibility that the
government’s position was “frivolous.” The case was not “groundless . . . with little
prospect of success,” and there is no evidence that it was “brought to embarrass or annoy
the defendant.” Id. (quotation marks omitted).
B.
Nor did prosecutorial bad faith support an award of attorney’s fees. On appeal,
Drake contends that the court should have granted her motion because prior to her grand
jury testimony, the government (1) falsely represented that she was not a target of its
investigation, and (2) acquiesced in her being represented by the same counsel that was
representing GrandSouth, creating a conflict of interest. Neither ground is persuasive.
First, the district court expressly declined to find that the government had acted in
bad faith. There was no evidence that the government acted intentionally to mislead Drake.
“[B]ad faith is not simply bad judgment or negligence.” Id. (quotation marks omitted).
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Because Drake had not shown that the government had a “dishonest purpose” or acted
“affirmatively . . . with furtive design or ill will,” she did not carry her burden to establish
bad faith. Id. (quotation marks omitted). Moreover, the district court permissibly concluded
that any inaccurate representation was harmless because the government did not introduce
Drake’s grand jury testimony at trial. See Fed. R. Crim. P. 52(a); J.A. 6628–29. Given that
Drake was not prejudiced by any misrepresentation, the court acted within its discretion
when it declined to award attorney’s fees on this basis.
Second, the government’s alleged acquiescence to Drake’s representation by
conflicted counsel does not support an award of attorney’s fees. No evidence suggests that
the government acted in bad faith—i.e., that it had a “dishonest purpose” or intentionally
refrained from pointing out a potential conflict that it had no hand in creating. In re 1997
Grand Jury, 215 F.3d at 436 (quotation marks omitted). And the district court again
permissibly concluded that Drake was not prejudiced on account of being represented by
GrandSouth’s counsel before the grand jury. Her constitutional rights were not violated
because there is no constitutional right to conflict-free counsel at grand jury proceedings,
United States v. Ayala, 601 F.3d 256, 272 (4th Cir. 2010), and Drake did not show any
other adverse consequences of being represented by conflicted counsel. The district court
therefore did not abuse its discretion when it declined to award attorney’s fees on the basis
of prosecutorial bad faith.
III.
Given the deficiency of Drake’s allegations that the government’s position was
vexatious, frivolous, or in bad faith, the district court also did not abuse its discretion in
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denying her motion for discovery. We note that some courts have suggested that the Hyde
Amendment does not authorize district courts to order discovery at all. See, e.g., Schneider,
395 F.3d at 91. Indeed, such discovery may potentially compromise prosecutorial decision-
making and deliberation. But we need not decide this question. Even if the Hyde
Amendment authorized discovery, we would review the district court’s decision not to
order it only for abuse of discretion. In this regard, the statutory language is permissive.
See 111 Stat. at 2519 (“To determine whether or not to award fees and costs under this
section, the court, for good cause shown, may receive evidence ex parte and in camera.”
(emphasis added)); United States v. Truesdale, 211 F.3d 898, 907 (5th Cir. 2000). The
district court here did not abuse any such discretion.
By the time of Drake’s motion for Hyde Amendment discovery, “volumes of
discovery . . . ha[d] been provided and evidentiary hearings, including testimony, ha[d]
been conducted” throughout the course of the litigation. J.A. 6632–33. But, as explained
above, Drake still failed to show that the government’s position was vexatious, frivolous,
or in bad faith. The district court was intimately familiar with the evidence in this case and
the government’s litigation conduct. It did not abuse its discretion when it held that “[i]n
light of the previously thorough and comprehensive discovery and presentation of
evidence,” there was “no basis to conclude further discovery [was] required.” Id. at 6633.
IV.
Given the significant evidence against her, Drake was fortunate to receive a Rule 29
dismissal from the court. As this case illustrates, such dismissals will not invariably result
in an award of Hyde Amendment attorney’s fees. Allowing awards as a matter of course
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USCA4 Appeal: 21-4242 Doc: 57 Filed: 03/31/2023 Pg: 19 of 19
in such cases would contradict the limiting language of the statute and discourage the
granting of such dismissals even when taking such action is the right thing to do.
For the foregoing reasons we affirm the judgment of the district court.
AFFIRMED
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