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United States v. Peake

United States Court of Appeals, First Circuit

October 14, 2015

UNITED STATES OF AMERICA, Appellee,
v.
FRANK PEAKE, Defendant, Appellant

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APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO. Hon. Daniel R. Domínguez, U.S. District Judge.

David Oscar Markus, with whom Mona E. Markus, A. Margot Moss, and Markus & Markus, PLLC, were on brief, for appellant.

Shana M. Wallace, Attorney, U.S. Department of Justice, Antitrust Division, with whom William J. Baer, Assistant Attorney General, Brent Snyder, Deputy Assistant Attorney General, Craig Y. Lee and James J. Fredricks, Attorneys, U.S. Department of Justice, Antitrust Division, were on brief, for appellee.

Before Torruella, Lynch, and Thompson, Circuit Judges.

OPINION

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TORRUELLA, Circuit Judge.

As a result of his conviction for participating in one of the largest antitrust conspiracies in the history of the United States, Defendant-Appellant Frank Peake (" Peake" ) raises a number of claimed errors with respect to his trial and sentencing for a serious price-fixing offense in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 (" Section 1" ). Peake challenges: (1) the validity of his indictment; (2) the scope of the search warrant executed by the government; (3) the district court's denial of his pre-trial motion to change venue; (4) improper remarks made by the prosecutor during trial; (5) the district court's ruling permitting prejudicial testimony; (6) the district court's denial of his request for a theory-of-defense instruction; (7) the district court's denial of his request for a mistrial during jury deliberations, and (8) the length of his sentence, which was based on the amount of commerce affected by the charged conspiracy, and which Peake contends the court incorrectly computed. Finding no errors and concluding that the district court marshaled this trial in a commendable manner, we affirm. After a brief overview of the factual background, we will take each of the issues one by one.

I. Background

We recount the facts in the light most favorable to the jury verdict, as supported by the record. See United States v. Andrade, 94 F.3d 9, 10 (1st Cir. 1996). Since 2002, waterborne cabotage between Puerto Rico and the mainland has been dominated by four freight carriers: Horizon Lines, Sea Star, Crowley, and Trailer Bridge. See In re Puerto Rican Cabotage Antitrust Litig., 815 F.Supp.2d 448, 454 n.3 (D.P.R. 2011). And, because of Puerto Rico's geographical situation, Puerto

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Rico's consumers rely on these carriers to transport most goods imported to the island. See Merchant Marine Act of 1920, Pub. L. No. 66-261, 41 Stat. 988, 999 (1920) (codified as amended at 46 U.S.C. § § 55101, et seq.). Seeking to maximize revenues, Horizon Lines and Sea Star agreed not to undercut each other in price and allocated precise market share quotas through an extensive conspiracy that included bid rigging and careful planning, coordination, and the kinds of day-to-day self-enforcement common of illegal agreements.

This behavior constituted an agreement in restraint of trade forbidden by Section 1. Peake, the former President and Chief Operating Officer (" COO" ) of Sea Star, played a managing role in the conspiracy, coordinating with competitors through meetings, phone calls, and emails, and attending to pricing or consumer-allocation disputes that his subordinates could not resolve on their own.

For example, during a meeting in Orlando in 2006, Peake coordinated with Horizon Lines executives to resolve existing disputes by agreeing to keep the market shares at their current levels, rather than reinstating the split in effect prior to his joining the conspiracy in 2005. Later that year, the market allocation became imbalanced when Walgreens, a major importer of consumer goods to Puerto Rico, decided not to divide freight contracts between Horizon Lines and Sea Star, and instead allocated all of its freight to Horizon Lines. Peake quickly agreed with an executive from Horizon Lines that the company would compensate by shifting cargo to Sea Star vessels or using Transportation Service Agreements, whereby Horizon Lines would pay Sea Star to carry its cargo even though it had capacity to transport it in its own vessels.

While the conspiracy was in full swing, a Sea Star senior executive working with Peake became a government informant. Based on his description of the conspiracy, the government initiated an extensive investigation that included an FBI search of Sea Star's headquarters in 2008. Four of Peake's co-conspirators were charged with antitrust violations and pleaded guilty before the U.S. District Court for the Middle District of Florida, Jacksonville Division. Following these events, a grand jury in San Juan, Puerto Rico, returned an indictment against Peake in November 2011 on one charge of conspiracy to suppress and eliminate competition by agreeing to fix rates and surcharges for freight services in interstate commerce between the United States and Puerto Rico.

Peake's co-conspirators testified against him at trial, revealing his involvement in the conspiracy and their discussions about setting surcharges, fees, and market share allocations. One such incident involved an email exchange between Peake and a competitor regarding prices offered to a client in an attempt to " avoid a price war."

After a nine-day trial, which took place over the course of three weeks, the jury found Peake guilty of participating in a conspiracy to fix the prices of Puerto Rico freight services, in violation of Section 1. The district court sentenced Peake to sixty months' imprisonment.

This appeal ensued.

II. The Indictment

Before addressing the main issues in this appeal, we briefly address an issue that, although Peake is raising on appeal for the first time, he claims would foreclose our jurisdiction on this matter.[1]

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Peake argues that Puerto Rico is not a state, yet the indictment charges Peake under Section 1, which prohibits agreements in restraint of trade or commerce " among the several States," and that his conviction must therefore be vacated.[2] There are at least two insurmountable problems with this argument. First, it is well-settled that, for purposes of the Sherman Act, Puerto Rico is " to be treated like a state and not like a territory," therefore, Section 1 fully applies to Puerto Rico. Cordova & Simonpietri Ins. Agency, Inc. v. Chase Manhattan Bank N.A., 649 F.2d 36, 38, 44 (1st Cir. 1981). Second, the evidence in the record shows that part of the freight carried by the companies in the conspiracy originated in one state before being transported to a port in a second state to be shipped to Puerto Rico. Therefore, the commerce affected by the conspiracy was not only between a state and Puerto Rico, but also among the states. Thus, Peake was correctly charged, and the indictment is not defective.

We now move on to Peake's appeal of the district court's denial of his motion to suppress, and then address his other trial-related claims, before finally turning to the appeal of his sentence.

III. Motion to Suppress

Peake appeals the district court's denial of his motion to suppress the government's search of his personal electronics. For the following reasons, we affirm the denial.

A. Standard of Review

In reviewing a challenge to the district court's denial of a motion to suppress, " we view the facts in the light most favorable to the district court's ruling," and " review the district court's findings of fact and credibility determinations for clear error." United States v. Camacho, 661 F.3d 718, 723 (1st Cir. 2011) (citation and internal quotation marks omitted). However, we review the lower court's legal conclusions, including its determination of whether the government exceeded the scope of the warrant, de novo. United States v. Fagan, 577 F.3d 10, 12-13 (1st Cir. 2009).

A search warrant must " describ[e] the place to be searched" and the " things to be seized." U.S. Const. amend. IV. The authority conferred by the warrant " is circumscribed by the particular places delineated in the warrant and does not extend to other or different places." Fagan, 577 F.3d at 13. Search warrants also have a specificity requirement, meaning " that warrants shall particularly describe the things to be seized," which " prevents the seizure of one thing under a warrant describing another." Marron v. United States, 275 U.S. 192, 196, 48 S.Ct. 74, 72 L.Ed. 231, Treas. Dec. 42528 (1927). Even though search warrants are limited to the particular places and things described in them,

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there is some breathing room in our analysis, since " search warrants and affidavits should be considered in a common sense manner, and hypertechnical readings should be avoided." United States v. Bonner, 808 F.2d 864, 868 (1st Cir. 1986) (citing Spinelli v. United States, 393 U.S. 410, 419, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969)).

A draft warrant presented to a magistrate judge may be altered or modified by the judicial officer or at his direction. See United States v. Hang Le-Thy Tran, 433 F.3d 472, 481 (6th Cir. 2006); United States v. Katoa, 379 F.3d 1203, 1208 (10th Cir. 2004); United States v. Arenal, 768 F.2d 263, 267 (8th Cir. 1985). When part of a warrant is considered invalid, " evidence seized under the valid portion may be admitted." United States v. George, 975 F.2d 72, 79 (2d Cir. 1992). Furthermore, when a warrant is limited to authorize the seizure of only certain objects, " container[s] situated within residential premises which are the subject of a validly-issued warrant may be searched if it is reasonable to believe that the container could conceal items of the kind portrayed in the warrant." United States v. Rogers, 521 F.3d 5, 9-10 (1st Cir. 2008).

B. The Search Warrants

In this case, a magistrate judge was presented with a draft warrant for his consideration. Upon reviewing it, he crossed out a paragraph under Attachment A, which described the premises to be searched. The stricken paragraph allowed the search of " briefcases, laptop computers, hand-held computers, cell phones, Blackberries, and other movable document containers found on the premises described." [3] In Attachment B, the magistrate judge also struck the following text from the description of the property to be seized: " memory calculators, pagers, personal digital assistants such as Palm Pilot hand-held computers." The magistrate judge left standing, however, other references to electronically stored documents and records. As amended, Attachment B described the property to be seized as follows:

As used above, the terms records, documents, programs, documentation, applications or materials include but are not limited to records, documents, programs, applications or materials created, modified or stored in any form, including any optical, electrical, electronic, or magnetic form (such as any information on an optical, electrical, electronic or magnetic storage device), including floppy disks, hard disks, ZIP disks, CD-ROMs, optical disks, backup tapes, printer buffers or other device memory buffers, smart cards . . . email servers, as well as opened and unopened e-mail messages and any printouts or readouts from any optical, electrical, electronic, or magnetic storage device . . . .

Additionally, the magistrate judge added two handwritten passages to the portion of the draft warrant governing the seizure of computers and other electronic devices, and ordered that any seized computers or electronic devices within the scope of the

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warrant be returned within thirty days of seizure. Specifically, the following language was inserted:

In the event that computer equipment and other electrical storage devices must be transported to the appropriate laboratory, rather than searched on the premises, the search of computer equipment and other electronic storage devices must be completed within 30 days of seizure.

and

If no evidence is found in the computer equipment and electronic storage devices by the end of the 30 day period, or if any ...

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