United States v. Capener , 590 F.3d 1058 ( 2010 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,  Nos. 07-10359
Plaintiff-Appellant-Cross-Appellee, 07-10372
v.
 D.C. No.
3:05-CR-0114-
MARK CAPENER,
Defendant-Appellee-Cross- RCJ-RAM
Appellant.
 OPINION
Appeal from the United States District Court
for the District of Nevada
Robert C. Jones, District Judge, Presiding
Argued and Submitted
November 17, 2008—San Francisco, California
Filed January 8, 2010
Before: Kim McLane Wardlaw and William C. Canby, Jr.,
Circuit Judges, and David G. Trager,* District Judge.
Opinion by Judge Trager
*The Honorable David G. Trager, United States District Court Judge for
the Eastern District of New York, sitting by designation.
677
680 UNITED STATES v. CAPENER
COUNSEL
Vijay Shanker, United States Department of Justice, Wash-
ington, DC, for the plaintiff-appellant-cross-appellee.
Jeffery S. Parker, Great Falls, Virginia, for the defendant-
appellee-cross-appellant.
OPINION
TRAGER, District Judge:
This case arises out of the failed prosecution of Dr. Mark
Capener for health care fraud in violation of 18 U.S.C.
UNITED STATES v. CAPENER 681
§ 1347, mail fraud in violation of 18 U.S.C. § 1341 and mak-
ing false statements in violation of 18 U.S.C. § 1001. During
the period relevant to this case, Dr. Capener was an otorhino-
laryngologist in Nevada. The charges against him involved
billing for surgeries that were allegedly either unnecessary,
never performed or exaggerated for billing purposes
(“upcoded”). After an extended investigation and a lengthy
trial, the district court dismissed many of the counts against
Capener on the ground that they were insufficiently supported
by the evidence and the jury acquitted Capener of the remain-
ing counts.
Following the trial, Capener moved for an award of fees to
cover his defense costs under the Hyde Amendment, 18
U.S.C. § 3006A note, which allows an award of fees to a
defendant when the prosecution acted in a manner that was
“vexatious, frivolous, or in bad faith . . . .” Id. The district
court partially granted Capener’s motion, awarding fees to
cover the costs of defending against certain counts associated
with one of the theories advanced by the government on the
ground that this theory was frivolous.
Both parties appeal the district court’s decision. The gov-
ernment argues that the district court erred by granting fees
after considering the government’s case piecemeal — rather
than viewing the case’s alleged faults in the context of the
case as a whole. The government also argues that, even
viewed piecemeal, no part of government’s prosecution meets
the Hyde Amendment’s standards for an award of fees. Cap-
ener cross-appeals, arguing that the district court should have
granted fees on the entire case. Capener also argues that the
district court should have granted him discovery regarding his
Hyde Amendment claim. For the reasons stated below, the
district court is reversed and Capener’s application for fees is
denied in its entirety.
682 UNITED STATES v. CAPENER
BACKGROUND
(1)
Investigation and Pre-Trial Proceedings
The investigation into Capener’s medical practice began
after Great-West Insurance Company referred him to the
Nevada Attorney General, who, in turn, referred him to fed-
eral authorities. Great-West had contacted the Attorney Gen-
eral’s office after Great-West’s investigation of Capener’s
insurance claims appeared to reveal a pattern of excessive
procedures and suspicious claims. In the course of the investi-
gation, the government consulted Dr. John Dooley. Dr. Doo-
ley reviewed some patient records and computed tomography
(“CT”) scans and indicated to the government that he believed
that Capener had billed for unnecessary and unperformed sur-
geries.1 Dooley also suggested that the government consult
Dr. Dale Rice. Dr. Rice reviewed Capener’s patient files,
pathology reports and CT scans and concluded that many of
the surgeries that Capener billed for were either unnecessary
or were not performed.
Capener was indicted in July 2005. The grand jury charged
him with 38 counts of health care fraud in violation of 18
U.S.C. § 1347, 13 counts of mail fraud in violation of 18
U.S.C. § 1341 and one count of making false statements in
violation of 18 U.S.C. § 1001. The indictment alleged that the
challenged procedures had not been performed, were unneces-
sary or were upcoded to increase the billing rate.
During the investigative phase, Dr. Rice indicated to the
government that part of his conclusions were supported by the
1
The record is not clear regarding how many patient files Dr. Dooley
reviewed. There is also no indication that Dr. Dooley ever disagreed with
the government’s main expert, Dr. Dale Rice, regarding any of the cases
in question.
UNITED STATES v. CAPENER 683
fact that no bone fragments had been reported in pathology
samples taken from some of Dr. Capener’s patients. Pathol-
ogy samples consist of tissue taken from a patient after sur-
gery. These samples are examined by a pathologist who then
prepares a report. The bulk of the pathology reports that Dr.
Rice reviewed had been prepared by Dr. George Mardini. Of
the set of reports that Dr. Rice reviewed, some did not explic-
itly note the presence of bone fragments in the pathology sam-
ple while others specifically mentioned bone fragments. Dr.
Rice concluded that, where bone fragments were present in a
pathology sample, Dr. Mardini explicitly listed them in his
report. The absence of any indication of fragments in the
report therefore seemed to Dr. Rice to indicate that there were
no fragments in the sample.
Dr. Rice theorized that, because some of the surgeries that
Capener claimed to have performed would require breaking
bones, bone fragments should have been present in the pathol-
ogy samples. Where it appeared that they were not present,
Dr. Rice reasoned that the surgery must not have been per-
formed. Dr. Rice never indicated to the prosecutors that he
needed further information or clarification regarding the pres-
ence or absence of bone fragments in these pathology reports.
Prior to trial, the government produced an expert witness
disclosure concerning Dr. Rice’s expected testimony. This
disclosure described Dr. Rice’s conclusion that Capener had
billed for unnecessary and unperformed surgeries. It also indi-
cated that Dr. Rice would base his testimony on CT scans and
his own experience and judgment. However, the disclosure
did not indicate that Dr. Rice would be basing any of his con-
clusions on the belief that bone fragments were absent from
the pathology samples. That said, the prosecution had dis-
closed the fact that the absence of bone fragments was a cen-
tral part of their theory in discussions with Capener’s prior
counsel at an earlier stage of the case.
684 UNITED STATES v. CAPENER
In fact, most, if not all of the pathology samples in question
did contain bone fragments. Dr. Mardini simply had not spe-
cifically mentioned this fact in some of the reports. Dr.
Mardini and another doctor called by the defense, Dr. Steven
Skoumal, explained at trial that bone fragments fall under the
more general category of “sinosal mucosa.” Dr. Skoumal tes-
tified that there was nothing wrong with the fact that Dr.
Mardini had not specifically mentioned bone fragments in the
pathology samples. The government interviewed Dr. Mardini
during its investigation but did not discover that the pathology
samples actually did contain bone fragments.2
Also, as part of the pretrial proceedings, Capener moved
for a subpoena to examine the medical records of the patients
mentioned in the indictment. The government opposed his ini-
tial motion for subpoenas on the grounds that the proposed
subpoenas were procedurally defective under Fed. R. Crim.P.
17, overly broad and non-compliant with protections for
patient privacy in the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”).
The district court quashed the subpoenas, generally agree-
ing with the reasons put forth by the government. Later, the
defense came forward with a more narrowly drawn request
for subpoenas in compliance with HIPPA. The government
filed no objection to most of the new, more narrowly drawn
subpoenas. A magistrate judge issued subpoenas pursuant to
the defense’s second request. The material produced in
response to these subpoenas indicated that many of the
patients Capener had operated on had a history of sinus prob-
lems, tending to show that they might have appeared to need
surgery.
2
The record is not entirely clear on what questions the prosecution
asked Dr. Mardini when it spoke with him. Dr. Mardini was called by the
defense at trial and was asked whether the prosecution specifically
inquired about the presence of bone fragments in the samples. He stated
that he could not recall.
UNITED STATES v. CAPENER 685
(2)
Trial
In its case-in-chief, the government called Dr. Rice. Dr.
Rice testified that, in his expert opinion, Capener had billed
for unnecessary or unperformed surgeries. The major bases
for his opinion were that (1) Capener’s records indicated
implausibly short times for the claimed surgeries, (2) some of
the CT scans indicated that certain nasal bone structures were
intact, which Dr. Rice felt would not have been intact if the
claimed surgery had been performed, (3) CT scans indicated
that some patients did not have frontal sinuses, as that term is
medically defined, making it impossible for Capener to have
performed frontal sinus surgery on them as he claimed and (4)
under Dr. Rice’s interpretation of the pathology reports, no
bone fragments were found in some pathology samples. Of
the seventeen health care fraud counts that would ultimately
reach the jury, eleven did not rely at all on the bone fragments
theory. With respect to the six counts where Dr. Rice did rely
on the bone fragments theory, Dr. Rice also based his conclu-
sion on one or more other theories as additional justifications.
The government called six significant doctors other than
Dr. Rice to substantiate the charges against Capener. These
other witnesses, however, collectively testified regarding far
fewer patients than Dr. Rice. Drs. Bud West, David Mathis,
Timothy Dyches, Anthony Zamboni and Michael Kaplan
offered opinions regarding one patient each. In each case,
they indicated that they did not believe that Capener had per-
formed the claimed surgery. Dr. David Bolick testified that
one patient’s pathology sample lacked a type of tissue that it
normally would have had if the claimed surgery had been per-
formed and that he did not receive a pathology sample for
another patient even though he normally would have. All told,
these doctors testified about a total of seven patients while Dr.
Rice testified regarding at least seventeen patients.3 In addi-
3
The figure of seventeen patients includes only those whose surgeries
related to counts that were actually sent to the jury rather than being dis-
missed by the district court.
686 UNITED STATES v. CAPENER
tion to these doctors, several of Capener’s employees testified
that they felt he used fraudulent billing practices. However,
the government presented only one witness who had actually
observed any surgeries — and that witness claimed to have
watched only a couple of them.
In response to the government’s contention that there were
no bone fragments in some of the relevant pathology samples,
the defense called Dr. Mardini, the pathologist who had pro-
cessed the samples. Dr. Mardini testified that there had been
bone fragments in most, if not all of the pathology samples he
examined. Another defense pathologist, Dr. Skoumal,
explained that bone fragments need not be separately listed on
a pathology report as they can fall under the general category
of sinonasal mucosa and Dr. Mardini had testified that, when
he referred to sinonasal mucosa, he was including bone frag-
ments. In addition, the defense presented pathology slides
from patients treated by Capener. On these slides, the bone
fragments were plainly visible.
The defense also addressed other elements of the govern-
ment’s case. In response to the contention that some of Cap-
ener’s surgeries had been unnecessary, the defense presented
testimony indicating that aggressive surgical intervention of
the sort espoused by Capener was an accepted treatment phi-
losophy and that CT scans of the type relied on by Dr. Rice
did not always indicate whether a patient suffered from sinus
symptoms. Further, Capener put on testimony supporting his
use of the relevant billing codes. The defense also presented
a video showing Capener rapidly performing a surgery that
the prosecution had indicated should take a long period of
time.
In its rebuttal case, the prosecution again called Dr. Rice.
Dr. Rice disputed the accuracy of the billing codes that Cap-
ener had used in charging insurance companies. Dr. Rice also
suggested that the presence of bone fragments did not indicate
UNITED STATES v. CAPENER 687
that Capener had performed exactly the kind of surgeries he
had claimed.
Following the close of the evidence, the defense moved to
dismiss all the charges against Capener. The district court dis-
missed all twenty-one health care fraud and mail fraud counts
alleging that Capener had performed unnecessary surgery, but
sent to the jury the remaining twenty-five counts which
alleged health care and mail fraud for unperformed surgeries
and perhaps upcoding — although the record is not entirely
clear on this point — and false statement. After a single day’s
deliberation, the jury acquitted Capener on all remaining
counts.
(3)
Post-Trial Proceedings
Following the verdict, Capener moved for an award of fees
under the Hyde Amendment. He argued that the prosecution’s
entire case was vexatious, frivolous and in bad faith. The gov-
ernment responded that its conduct did not entitle Capener to
fees. In particular, the government argued (1) that its bone
fragments theory was based on an understandable mistake
given that Dr. Mardini had sometimes separately listed the
presence of bone fragments, suggesting that when he did not
do so, bone fragments were not present, and (2) that the bone
fragments theory was only one of the government’s argu-
ments at trial.
The district court held a hearing on the fee motion at which
the judge made several pertinent remarks. For one, the district
court denied Capener’s request for documents from the prose-
cution, finding that Capener had not raised sufficient suspi-
cion to justify an order to produce documents. Regarding the
fee request, the district court stated at the start of the hearing
that:
688 UNITED STATES v. CAPENER
So far, subject to your arguments, I’m not convinced
that the government moves in bad faith . . . . [F]rom
the Court’s own review of the proceedings, there
was every reason to have suspicion and, of course,
ultimately to obtain a finding of probable cause that
criminal conduct had been engaged in . . . . So
you’ve got an uphill battle . . . .
The court later said that “it certainly is very possible that
if this had been a civil lawsuit to recover fraud . . . that the
government . . . could well have prevailed . . . .” The court
also stated that it could not “fault the government for bringing
this case.” Further, the district court stated, “I am going to
award — I’m considering awarding maybe a quarter of the
attorneys fees . . . . [T]hat initial view is based on some very
brief statements in the briefs here. It will have to be based on
a more careful review of the affidavits with regard to the
extent of the injury to the defendant . . . .” At the close of the
hearing, the district court indicated that “I’m not presently, as
I sit here, inclined to exceed, roughly, a quarter, or a third of
the overall fees. So I’ll do that with review and we’ll award
something accordingly, for the reasons I’ve stated here.”
After the hearing, the district court produced a written order
making findings of fact and law. The district court found that
Capener was entitled to partial relief under the Hyde Amend-
ment. Specifically, the district court held that “the Govern-
ment pursued frivolous claims as to the fraud-related counts
based on the Government’s first [theory] — the lack of bone
in the pathology reports . . . .” The district court reasoned that
the “Government [either] consciously decided to proffer a the-
ory it knew was false, or it failed to conduct any investigation
. . . to confirm whether Dr. Rice’s contentions regarding lack
of bone fragments was . . . accurate.” The district court also
noted that the government had not indicated that Dr. Rice
would testify regarding the bone fragments theory in its
expert disclosure. Nonetheless, the district court found that
the government had not acted in bad faith, noting that there
UNITED STATES v. CAPENER 689
was no evidence that Dr. Rice lied on the stand and that there
was not sufficient evidence that the government consciously
acted with ill will.
Additionally, the district court found that the government
had not acted vexatiously with regard to its opposition to Cap-
ener’s subpoenas for the medical records of his surgical
patients or in its decision to follow leads provided by alleg-
edly disgruntled informants. The district court concluded that
there was no ill will in either case and that some of the counts
had been worthy of being submitted to a jury. Finally, the dis-
trict court found that Capener’s counsel “has not demon-
strated that the Court should depart from” the standard
$125/hour rate. Accordingly, the district court granted Cap-
ener’s counsel $279,015.50 in fees and costs.
STANDARD OF REVIEW
“An award of attorney fees pursuant to the Hyde Amend-
ment is reviewed for an abuse of discretion.” United States v.
Sherburne, 506 F.3d 1187, 1189 (9th Cir. 2007). Discovery
orders under the Hyde Amendment are reviewed for abuse of
discretion. United States v. Lindberg, 220 F.3d 1120, 1126
(9th Cir. 2000). “A district court abuses its discretion if it
does not apply the correct law or if it rests its decision on a
clearly erroneous finding of material fact.” Marchand v.
Mercy Med. Ctr., 22 F.3d 933, 936 (9th Cir. 1994). “Reversal
is warranted only if we find with a firm conviction that the
district court committed a clear error of judgment.” United
States v. Manchester Farming P’ship, 315 F.3d 1176, 1181
(9th Cir. 2003).
DISCUSSION
(1)
The Government’s Appeal
On appeal, the government argues that the district court
erred by considering the alleged flaws in the prosecution’s
690 UNITED STATES v. CAPENER
case piecemeal rather than asking whether the case — viewed
as a whole — met the Hyde Amendment’s standards for an
award of fees. Capener responds that the district court did
view the alleged shortcomings of the prosecution in the con-
text of the case as a whole and that, even if it had not, it
would not have been error to focus only on the allegedly
flawed portions of the government’s case. In fact, the district
court conducted a piecemeal analysis of the government’s
case. Whether this approach was proper or not is something
we need not decide because even if a piecemeal approach is
permissible, the district court’s conclusion that a portion of
the government’s case was frivolous was clearly erroneous.
The Hyde Amendment provides that:
[T]he court, in any criminal case (other than a case
in which the defendant is represented by assigned
counsel paid for by the public) . . . may award to a
prevailing party, other than the United States, a rea-
sonable attorney’s fee and other litigation expenses,
where 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. Such awards shall be
granted pursuant to the procedures and limitations
(but not the burden of proof) provided . . . under sec-
tion 2412 of title 28, United States Code.
18 U.S.C. § 3006A note (emphasis added).4
4
This case requires consideration only of the threshold question of
whether a claimant receives any fees at all. Although it is unnecessary to
decide the issue, it is worth noting that the amount of fees awarded may
be subject to different considerations from those discussed here. Cf.
Comm’r, Immigration and Naturalization Serv. v. Jean, 496 U.S. 154,
160-61 (1990) (discussing the Equal Access to Justice Act “EAJA”);
United States v. Heavrin, 330 F.3d 723, 730 (6th Cir. 2003) (noting that
EAJA cases are informative in interpreting the Hyde Amendment).
UNITED STATES v. CAPENER 691
[1] Thus, under the Hyde Amendment, a victorious defen-
dant may be able to recover legal fees upon showing that the
position of the United States was either vexatious, frivolous
or in bad faith. 18 U.S.C. § 3006A note. However, “the bur-
den is on the defendant in the underlying case.” Manchester
Farming, 315 F.3d at 1182. On the other hand, “[t]he ele-
ments are disjunctive; thus, the defendant need only prove one
of the three elements to recover.” Id. Regardless of the ele-
ment a prevailing defendant advances, “the Hyde Amendment
[is] targeted at prosecutorial misconduct, not prosecutorial
mistake.” United States v. Braunstein, 281 F.3d 982, 995 (9th
Cir. 2002) (quoting United States v. Gilbert, 198 F.3d 1283,
1304 (11th Cir. 1999)). Indeed, “mere ‘faulty judgment’ is not
vexatious, frivolous, or in bad faith.” United States v. Tucor
Intern., Inc., 238 F.3d 1171, 1180 (9th Cir. 2001).
[2] As noted above, although the district court did not find
that the government had acted vexatiously or in bad faith, it
did find that the bone fragments theory was frivolous. Frivo-
lousness is defined objectively. A “ ‘frivolous’ case is one
that is groundless . . . . [A] case is frivolous when the govern-
ment’s position was foreclosed by binding precedent or so
obviously wrong as to be frivolous.” Manchester Farming,
315 F.3d at 1183 (internal quotation marks omitted). In sup-
port of the district court’s frivolousness finding, Capener pri-
marily contends that the prosecutors should have done a more
thorough investigation and uncovered the fact that the pathol-
ogy samples actually did contain bone fragments. As it hap-
pened, the government did interview the pathologist, Dr.
Mardini, but did not discover that the samples contained bone
fragments. This was a regrettable mistake — a clear failure by
the prosecution to do its homework. The district court’s find-
ing that it was misconduct of the sort that could justify a fee
award, however, goes too far.
[3] It is true that, under limited circumstances, a failure by
the government to thoroughly investigate a case can constitute
frivolousness. See Braunstein, 281 F.3d at 996-97. However,
692 UNITED STATES v. CAPENER
a failure to sufficiently investigate generally can rise to the
level of frivolousness only when the government had some
affirmative reason to know that further investigation was
needed. For example, the Braunstein court found that the
prosecutors acted frivolously when they had substantial infor-
mation affirmatively calling their theory into question and
pointing the way to further evidence but failed to investigate
further. Id. In our case, by contrast, there is no evidence that
the government had any affirmative reason to believe that its
bone fragments theory was wrong.
Indeed, the government argues that it relied on Dr. Rice’s
expert opinion and therefore did not act frivolously with
respect to the bone fragments theory. Because Dr. Rice never
indicated any need for further investigation, the government
contends, their failure to confirm that the pathology samples
did not contain bone fragments does not justify a finding of
frivolousness.
[4] Where the government ceases investigation in reliance
on the opinion of an expert and that expert has not indicated
a need for any further investigation, the government generally
has not acted frivolously. Cases from several areas of law
indicate that this kind of reliance usually does not fall below
minimum professional standards. See, e.g., Hendricks v. Cal-
deron, 70 F.3d 1032, 1038 (9th Cir. 1985) (considering a
claim of ineffective assistance of counsel); Dubois v. U.S.
Dep’t of Agriculture, 270 F.3d 77, 83 (1st Cir. 2001) (consid-
ering a denial of sanctions). Though there do not appear to be
any Hyde Amendment cases on point, the cases cited above
still suggest that such reliance is generally not “obviously
wrong,” as required for a finding of frivolousness. To be sure,
Hendricks and Dubois do not apply particularly demanding
tests of attorney competence. They are, however, still relevant
to the case at hand. The Hyde Amendment does not require
excellence — it targets “prosecutorial misconduct, not pro-
secutorial mistake.” Braunstein, 281 F.3d at 995. “[M]ere
‘faulty judgment’ is not vexatious, frivolous, or in bad faith.”
UNITED STATES v. CAPENER 693
Tucor, 238 F.3d at 1180. Reliance on an expert may well be
faulty judgment in a given instance, but it generally will not
constitute misconduct of the sort sanctioned by the Hyde
Amendment, absent some affirmative reason for the govern-
ment to know such reliance is misplaced.
Capener responds first that, as a factual matter, the govern-
ment was not actually relying on Dr. Rice’s expertise but had
instead misled him — intentionally or otherwise — as to the
contents of the pathology samples. Second, Capener contends
that, even if the government had relied on Dr. Rice, that reli-
ance would not automatically prevent liability under the Hyde
Amendment. As to his first contention, Capener argues that
Dr. Rice depended on the prosecutors for information to such
a degree that he was relying on them rather than the other way
around. This issue centers on what the prosecutors told Dr.
Rice regarding Dr. Mardini’s pathology reports. Dr. Rice’s
affidavit indicates that the prosecutors told him that Dr.
Mardini had “verified the content of his reports.”
[5] This hardly diminishes the prosecutors’ reliance on Dr.
Rice’s expertise. The fact that the prosecutors told Dr. Rice
that Dr. Mardini “verified” his reports could mean one of two
things: either that the prosecutor told Dr. Rice that the reports
were truthful or that the prosecutors told Dr. Rice how to
interpret the reports. In order for Rice to have made his error
in reliance on the prosecutors, they would had to have told
him how to interpret the reports. Dr. Rice’s error was one of
interpretation — deciding that the fact that a pathology report
did not specifically mention bone fragments meant that no
bone fragments were actually present. There is no reason to
think that the prosecutors told Dr. Rice how to interpret the
pathology reports or that he would have listened to them even
if they had. The interpretation of a pathology report is a tech-
nical matter not a legal one. Accordingly, there is no basis for
claiming that the prosecutors were not acting in reliance on
Dr. Rice when they halted their investigation of the bone frag-
ments theory.
694 UNITED STATES v. CAPENER
[6] Moreover, even if there are circumstances under which
a prosecutor’s reliance on an expert would not shield the gov-
ernment from liability under the Hyde Amendment, this case
does not present such a situation. There is nothing else about
the facts surrounding the prosecutors’ reliance on Dr. Rice
that suggests that this reliance was frivolous. Dr. Rice was an
expert in his field and did not indicate that he needed any
additional information regarding the absence of bone frag-
ments in the pathology samples. Though the government
apparently failed to ask the pathologist, Dr. Mardini, about the
bone fragments issue, there was no specific indication that it
was necessary to do so. Moreover, some of Dr. Mardini’s
pathology reports specifically indicated the presence of bone
fragments, making it reasonable to infer, as Dr. Rice and the
government apparently did, that where a report did not specif-
ically indicate bone fragments, that sample did not contain
bone fragments.5
The strongest point for Capener on the issue of whether the
prosecutors were frivolous with respect to the bone fragments
theory is the fact that the district court’s finding on this point
is entitled to deference. The district court wrote that:
[E]ither the Government consciously decided to
proffer a theory it knew was false, or it failed to con-
duct any investigation or inquiry to confirm whether
5
Moreover, during the trial, the prosecution spoke with a pathologist
named Dr. Samuel Parks. Dr. Parks indicated that, if some reports specifi-
cally mention the presence of bone fragments, it would be normal to
assume that reports that do not specifically mention bone fragments indi-
cate that the samples do not contain bone fragments. Dr. Parks also indi-
cated that a report should specifically mention bone fragments when it
contains bone fragments. Dr. Parks concluded that it was proper to inter-
pret the reports written by Dr. Mardini that did not specifically mention
bone fragments as reflecting the fact that the samples did not contain bone
fragments. This buttresses the conclusion that the prosecution did not err
in a manner that should subject them to liability under the Hyde Amend-
ment.
UNITED STATES v. CAPENER 695
Dr. Rice’s contentions regarding lack of bone frag-
ments was in fact accurate. In addition, the govern-
ment failed to produce to Capener expert disclosures
from Dr. Rice, who discussed the lack of bone as a
basis for his opinion. Taken together, these facts
indicate the Government had reason to believe their
lack-of-bone theory was without support.
[7] This finding, however, is clearly erroneous. The record
simply does not substantiate the assertion that the government
knew or had reason to believe that its lack of bone fragments
theory was false. The district court cites only one fact in sup-
port of this view — that the government’s pre-trial expert wit-
ness disclosure did not specifically indicate that Dr. Rice
would base some of his testimony on the absence of bone
fragments in the pathology sample.
The government, however, told Capener’s prior attorney
about this basis for Dr. Rice’s opinions at an earlier stage of
the case. Though the failure to include this information in the
expert witness disclosure is regrettable, the fact that defen-
dant’s prior counsel was informed of the relevant information
in another way indicates that there was no intent to deceive
and no reckless disregard for the truth. Because the failure to
disclose was not done with a culpable mental state, it cannot
be evidence of willful blindness on the part of the prosecutors.
[8] Finally, there is no basis in the record for the district
court’s statement that the government might have advanced a
false theory. Indeed, this contention is contradicted by the dis-
trict court’s later finding that the government did not “con-
spire[ with Dr. Rice] to knowingly present false testimony.”
Accordingly, the district court’s finding that the government’s
conduct regarding the bone fragments theory was frivolous is
unsustainable.
696 UNITED STATES v. CAPENER
(2)
Capener’s Cross-Appeal
[9] Turning to Capener’s argument that he should have
been awarded fees for the entire case, Capener raises several
challenges to the government’s conduct. First, he claims that
the structure of the government’s case was inappropriate. He
argues that the prosecutors should not have tried to criminal-
ize a difference in medical opinion regarding what treatments
were necessary or structured a prosecution around highly
technical medical billing codes. In fact, there was nothing
improper about these aspects of the government’s case. Cap-
ener was not being charged with treating patients on the basis
of erroneous medical views — he was being charged with
fraud for allegedly performing surgeries that he did not genu-
inely believe were necessary. The evidence presented by the
prosecution to the effect that the surgeries were not actually
necessary tended to show that Capener could not have subjec-
tively believed they were necessary given his medical training
and experience. Similarly, the government’s arguments
regarding Capener’s use of billing codes were proper. Regard-
less of how complex the codes are, if Capener willfully
upcoded procedures, that could constitute fraud.
[10] Second, Capener argues that the prosecution’s conduct
during the investigation was actionable under Hyde Amend-
ment. His central argument is that the government must have
been attempting to suppress or at least avoid the truth.6 Cap-
ener faults the government for opposing his initial attempt to
6
Capener also alleges that this case arose against a background of mali-
cious complaints by individuals who were biased against him — such as
doctors who were business competitors of his — and that the government
relied partly on disgruntled employees of Capener’s as witnesses. Of
course, the government must often rely on individuals who may have
some agenda. This cannot give rise to Hyde Amendment liability here,
however, given that the government recruited witnesses with no personal
bias against Capener, such as Dr. Rice.
UNITED STATES v. CAPENER 697
obtain subpoenas for the medical records of his patients. Cap-
ener sought these subpoenas in order to demonstrate that the
patients had a history of sinus problems and therefore may
have looked like they needed treatment. The district court,
however, correctly found that there was nothing wrong with
the government’s initial opposition. Capener’s initial subpoe-
nas were invalid because, among other things, they did not
comply with the privacy protections in HIPAA. There cannot
be anything improper with opposing a legally invalid sub-
poena. Moreover, the government did not oppose the bulk of
Capener’s second round of subpoenas, which were HIPAA
compliant, indicating that the prosecution merely wanted sub-
poenas that were legally valid.
Also regarding the government’s conduct during the inves-
tigative phase of the case, Capener insists that the prosecution
must have known that his patients had a history of sinus prob-
lems and thus that surgery might have appeared necessary.
Capener bases this contention on the fact that the case was
referred to the government by an insurance company. He pre-
sumes that the insurance company had the relevant medical
records and that the insurance company would have commu-
nicated the relevant facts about the patients’ sinus problems
to the prosecutors in making the referral. Capener argues that,
if the prosecutors had known of these sinus problems, it could
suggest that they were attempting to avoid the truth. The pres-
ence of prior sinus symptoms could at least arguably tend to
show that Capener might have believed that the patients in
question needed surgery because they had a history of sinus
problems.
However, there is no real evidence that the prosecutors
knew that some of Capener’s patients had prior sinus prob-
lems. Nor is it necessarily true that the fact that the case was
referred by an insurance company indicates that the prosecu-
tors would have known of the sinus problems. The insurance
company may not have informed the prosecutors of the
patients’ full medical histories or may not have had all the
698 UNITED STATES v. CAPENER
information itself. Capener argues that, even if the prosecutors
did not know of these prior sinus problems, they should have
sought the relevant medical records and uncovered this fact
for themselves. In an ideal world, perhaps, the prosecutors
would have tracked down these records. However, their fail-
ure to do so was, at worst, negligence. Mere negligence can-
not form the basis of an award under the Hyde Amendment.
Braunstein, 281 F.3d at 995; see also In re 1997 Grand Jury,
215 F.3d 430, 436 (4th Cir. 2000).
[11] Capener also argues that the prosecution acted in bad
faith, specifically with regard to Dr. Rice’s testimony. As
noted above, the district court specifically found that the pros-
ecution did not intentionally proffer false testimony from Dr.
Rice. Capener presents no substantial evidence to the con-
trary. Indeed, there is no basis for claiming that Dr. Rice’s tes-
timony was willfully false, rather than erroneous. Capener
claims that Dr. Rice implied he had personal knowledge of
facts that he actually had gleaned from reports created by
other doctors. Whether Dr. Rice implied personal knowledge
at trial is debatable, but even if he did, it hardly shows inten-
tional or willful misconduct. Capener also stresses that the
prosecution knew Dr. Rice would testify without having actu-
ally seen the pathology slides and argues that this shows an
element of willful blindness. This is, however, a highly tech-
nical area. To rely on medical reports rather than the slides is
hardly unreasonable. For the reasons stated above, there was
nothing egregious about relying on Dr. Rice.
[12] Thus, having found that the government’s advance-
ment of the bone fragment theory was not frivolous, we see
nothing further in the prosecution’s case to suggest that liabil-
ity was appropriate under the Hyde Amendment. Accord-
ingly, no fee award should have been granted in this case.
UNITED STATES v. CAPENER 699
(3)
Capener’s Discovery Motion
Capener further contends that the district court erred by
refusing to grant him discovery in support of his motion for
fees. Were this the case, a remand might be necessary so that
the results of any such discovery would be available in decid-
ing whether to award fees. However, the district court did not
err in refusing to grant discovery on Capener’s Hyde Amend-
ment claim.
[13] The Hyde Amendment’s tools for developing evidence
are extremely limited. As noted above, the Hyde Amend-
ment’s procedures are based on the EAJA, which provides
that a party’s entitlement to fees shall be “determined on the
basis of the record . . . which is made in the civil action for
which fees and other expenses are sought.” 28 U.S.C.
§ 2412(d)(1)(B). The Eleventh Circuit has remarked that
“Congress added this language to ensure that the substantial
justification determination will not involve additional eviden-
tiary proceedings or additional discovery of agency files,
solely for EAJA purposes.” United States v. Certain Real
Estate Property Located at 4880 S.E. Dixie Highway, 838
F.2d 1558, 1564-65 (11th Cir. 1988) (internal quotation marks
omitted).
The Hyde Amendment itself provides little additional scope
for investigating the government’s conduct. One portion of
the Hyde Amendment indicates that “the court, for good cause
shown, may receive evidence ex parte and in camera . . . .”
18 U.S.C. § 3006A note. Though this provision does not pro-
vide for traditional discovery in so many words, we have pre-
viously suggested that it might make some form of
evidentiary development possible on a showing of good
cause. United States v. Lindberg, 220 F.3d 1120, 1126 (9th
Cir. 2000).
700 UNITED STATES v. CAPENER
[14] The exact scope of this provision need not be decided
here. The district court found that Capener had failed to show
good cause for requiring the government to produce evidence.
That finding was not an abuse of discretion. As the district
court noted, Capener sought documents primarily to substanti-
ate his claims that the prosecution acted in bad faith — but he
failed to present any evidence to the district court supporting
his allegations of bad faith on the part of the prosecutors.
Under these circumstances, it was not an abuse of discretion
to deny discovery.
CONCLUSION
[15] For the reasons stated above, the district court’s judg-
ment awarding partial fees is reversed, and Capener’s cross-
appeal seeking full fees is rejected.
No. 07-10359 (main appeal) REVERSED.
No. 07-10372 (cross-appeal) AFFIRMED.