Apr 13

D.C. Circuit Reins In District Court for Second-Guessing Government’s Deferred Prosecution Agreement

This guest post was authored by our colleague Jeremy A. Gunn, an associate in the firm’s Litigation Department.

In an unusual win for both the U.S. Department of Justice and corporate defendants, the D.C. Circuit last week reversed a district court’s refusal to pause the speedy-trial clock pursuant to a deferred prosecution agreement.  United States v. Fokker Servs. B.V., — F.3d —, No. 15-3016, slip op. at 1 (D.C. Cir. Apr. 5, 2016).  The district court’s action was the first time that any federal court had denied a motion to exclude time under the Speedy Trial Act based on a deferred prosecution agreement being too lenient on corporate defendants.  On appeal, the D.C. Circuit held that the Speedy Trial Act does not confer authority on a district court to withhold exclusion of time based upon a disagreement with the Department of Justice’s charging decisions.

In 2010, Fokker Services – a Dutch aerospace company that provides aircraft manufacturers with technical support and equipment – voluntarily notified the Government that it had potentially violated federal sanctions by engaging in illicit transactions with Iran, Sudan, and Burma.  United States v. Fokker Servs. B.V., 79 F. Supp. 3d 160, 161 (D.D.C. 2015), vacated and remanded, No. 15-3016 (D.C. Cir. Apr. 5, 2016).

Fokker fully cooperated with the Government’s investigation for more than four years. As a result of that investigation, the Government negotiated a global settlement with Fokker that provided an 18-month deferred prosecution agreement (“DPA”).  As part of the DPA, Fokker was required to pay $21 million in fines and accept responsibility for violating U.S. sanctions and export laws.  In return, the Government agreed to dismiss its charges upon Fokker’s compliance.

To put the issues raised in the appeal in context, the district court and the Government jointly share authority to enforce the Speedy Trial Act (the “Act”).  See 18 U.S.C. §§ 3161–74.  The Act mandates that a criminal trial commence within 70 days from the filing of an information or an indictment. See 18 U.S.C. § 3161(c)(1).  However, certain events – such as a DPA – may trigger the exclusion of time under the Act.  Specifically, the Act excludes “[a]ny period of delay during which prosecution is deferred by the attorney for the Government pursuant to written agreement with the defendant, with the approval of the court, for the purpose of allowing the defendant to demonstrate his good conduct.” Id. § 3161(h)(2) (emphasis added).

In June 2014, the Government filed a one-count information against Fokker accompanied with the DPA.  The Government and Fokker also entered a joint motion to exclude time under the Speedy Trial Act.  In February 2015, unimpressed with the $21 million fine and with no corporate officer prosecutions, Judge Richard J. Leon resoundingly rejected the joint motion to exclude time under the Act, pointing out that the agreement would “promote disrespect for the law” and was an inappropriate “exercise of prosecutorial discretion.” Fokker Servs., slip op. at 8.  Subsequently, the Government and Fokker appealed seeking to reverse the order.

In vacating Judge Leon’s order, Circuit Judge Sri Srinivasan (perennial potential Supreme Court nominee), writing for the Court, held that the Speedy Trial Act does not authorize a district judge to withhold the exclusion of time pursuant to a DPA because the district judge thought the agreement was too lenient.  The Court grounded its analysis in the Executive branch’s constitutional duty to exercise discretion over charging determinations.  In particular, the D.C. Circuit noted that the Judiciary is neither equipped nor “competent to undertake” the assessment of whether to bring charges against a defendant.  Id. at 11.  Although the Speedy Trial Act provides that exclusions of time are subject to the district court’s approval, the D.C Circuit further noted that the Act does not give unconditional authority to “scrutinize the prosecution’s discretionary charging decisions.”  Id. at 9.  Rather, looking to the legislative history, the appeals court determined that the purpose of judicial oversight is to assure that the DPA is allowing the defendant to comply with the laws and is simply not a pretext to evade the Act’s time limits. Id. at 17.

The three-judge panel likened the Speedy Trial Act’s “approval of court” provision to Rule 48(a) of the Federal Rules of Criminal Procedure, which requires the prosecutor to obtain “leave of court” before dismissing charges against a criminal defendant.  With regard to Rule 48(a)’s leave of court provision, the Supreme Court has determined that Rule 48(a) does not grant any meaningful role for courts in deciding to dismiss a case, but rather protects “a defendant against prosecutorial harassment.”  Id. at 11–12 (quoting Rinaldi v. United States, 434 U.S. 22, 29 n.15 (1977)).

Similarly, the D.C. Circuit compared this case to United States v. Microsoft Corp., where the Government filed a civil antitrust complaint against Microsoft along with a proposed consent decree encompassing the parties’ settlement.  56 F.3d 1448, 1452 (D.C. Cir. 1995).  In that case, the district judge rejected the consent decree because he believed that the decree was not in the public’s interest.  Id. at 1453.  The D.C. Circuit reversed the district judge because the “public interest standard did not empower the district judge to reject the remedies sought in the consent decree merely because he believed other remedies were preferable.”  Fokker Servs., slip op. at 13 (citing Microsoft Corp., 56 F.3d at 1460) (internal citations omitted)).

Moreover, the D.C. Circuit dismissed the court-appointed amicus’ argument that the “approval of the court” provision in the Speedy Trial Act is comparable to the court approving a plea agreement under Federal Rule of Criminal Procedure 11.  The appellate court reasoned that “the district court’s authority to ‘accept’ or ‘reject’ a proposed plea agreement under Rule 11 is rooted in the Judiciary’s traditional power over criminal sentencing, as the Rule itself indicates in permitting the court to ‘defer decision until the court has reviewed the presentence report.’” Id. at 18 (citing Fed. R. Crim. P. 11(c)(3)(A)). Unlike a plea agreement, a DPA involves no formal adoption of the terms of the agreement by the judge.  Rather, the DPA’s goal is for the defendant to avoid criminal conviction and sentencing by demonstrating compliance with the laws.

For now, federal district judges may have their hands tied in accepting DPAs that the court considers either too lenient on one hand or too stringent on the other.  That is, this decision may give corporate counsel confidence that the district court will not disturb their negotiated DPA.  On the other hand, this decision may now empower the Department of Justice to pursue harsher DPAs with the knowledge that a district court is unlikely to upset the agreement.

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