United States District Court, D. Minnesota
Jacqueline Blaesi-Freed, Linda I. Marks, Roger J. Gural and
Vijay Shanker, U.S. Department of Justice for the United
States of America.
S. Friedberg, Joseph S. Friedberg, Chartered and Robert D.
Richman for Defendant Moran Oz.
RICHARD NELSON, UNITED STATES DISTRICT JUDGE
matter is before the Court on acquitted-Defendant Moran
Oz's Motion for Attorney's Fees and Expenses Under
the Hyde Amendment (“Oz's Mot.”) [Doc. No.
947]. For the reasons set forth below, Oz's Motion is
March 7, 2017, after nearly four weeks of trial and at the
conclusion of the Government's case, this Court granted
Defendant Moran Oz's (“Oz”) Motion For A
Judgment of Acquittal under Federal Rule of Criminal
Procedure 29 and ordered that he be acquitted of all charges
against him. (See Trial Tr. Vol. 19 dated 3/7/2017
at 3055- 59 [Doc. No. 1020].) Specifically, the Court
found that even under Rule 29's demanding standard, Oz
met the burden of establishing that the Government had failed
to introduce sufficient evidence that would allow the jury to
find beyond a reasonable doubt that Oz possessed the
intent-or mens rea-required to convict him on any of the
charges. (See Id. at 3056-58.) Now, Oz asks that
this Court order the Government to reimburse him his
attorneys' fees and other costs pursuant to the Hyde
Amendment, 18 U.S.C. § 3006A, note, arguing that the
Government's prosecution was frivolous, vexatious, or in
ruling of a sister court aptly summarizes the challenge of
receiving an award of fees under the Hyde Amendment:
Defendant, an innocent man, faces financial hardship because
of the Government's unsuccessful prosecution of him. Even
the slightest empathy produces a sense of unfairness; but
subjective fairness cannot guide the Court. This Court must
remain anchored by the law as enacted by Congress. It is duty
bound to follow that law even if the consequences are harsh.
That law is clear. Congress has decided that, except in a
rare case of prosecutorial misconduct, a citizen must bear
the legal cost of an acquittal. The narrow exception to this
principle, carefully carved out by Congress, allows a
defendant to recover his costs of a successful defense only
if he proves that the Government's prosecution was
frivolous, vexatious, or in bad faith.
United States v. Shelnutt, No. 4:09-CR-14 (CDL),
2010 WL 1223943, at *1 (M.D. Ga. Mar. 19, 2010).
hearing on Oz's Motion, the Government conceded that it
made many mistakes during this prosecution that ultimately
caused it to “implode” at trial. Even
“innocent” mistakes-those that result from
inexperience or negligence rather than affirmative
misconduct-carry real and serious consequences when they
involve the immense prosecutorial might of the United States.
Here, Oz was uprooted from his native country, incarcerated
for several months, forced to live in the United States for
more than two years while subject to intrusive monitoring,
and spent hundreds of thousands of dollars on his legal
the standard for awarding fees under the Hyde Amendment is
onerous. It allows for an award only under limited
circumstances that do not include prosecutorial mistakes,
inexperience, or even poor judgment. The Court is duty-bound
to follow the law and does so here, holding that although
this case presents a close call, Oz has not produced evidence
of the sort of frivolous, vexatious, or bad faith conduct
that would allow for an award of fees.
facts of this case have been set forth at length in the
previous orders of this Court. They are briefly recounted
here only to the extent necessary to rule on Oz's Motion.
The Government's Investigation and the Charges Against
case was the result of a years-long, global investigation by
the Government into an online pharmacy known as RX Limited
(“RXL”). United States v. Oz, No.
13-cr-273 (SRN/FLN), 2017 WL 480389, at *1 (D. Minn. Feb. 3,
2017). The Government alleged that RXL amounted to a
conspiracy to illegally distribute prescription drugs over
the internet. See Id. The Government had evidence
that RXL distributed large amounts of prescription drugs
using a series of websites. Customers filled out medical
questionnaires on the websites, those questionnaires were
purportedly reviewed by American doctors (in some instances,
individuals without medical licenses approved prescriptions)
who wrote prescriptions, and those prescriptions were filled
by American pharmacies and mailed to the customer. The
Government alleged that these practices did not comport with
the requirements of various federal statutes-namely that the
customers and doctors did not have the necessary
physician-patient relationships and that a controlled
substance, in the form of a prescription drug called
Fioricet, was dispensed through this process without the
necessary licenses and registration. (See generally
Indict. [Doc. No. 5].)
run by Paul Calder Le Roux (“Le Roux”)-a wealthy,
self-confessed murderer, international drug dealer, arms
trafficker, and computer hacker-who oversaw a multi-faceted
international criminal enterprise. See Oz, 2017 WL
480389 at *1. Le Roux pled guilty to numerous
charges-including misbranding drugs, mail and wire fraud, and
conspiracy stemming from his involvement with RXL-on separate
indictments in the Southern District of New York.
Id. Le Roux was not a defendant in this matter and
the Government did not call him as a witness at trial-a
decision that created numerous evidentiary issues related to
key pieces of evidence.
Israeli citizen, joined an internet pharmacy company
incorporated in Israel in 2005. Id. at *2. This
company was not immediately identifiable as part of RXL, Oz
believed it was a legitimate business (like many other
similar internet pharmacy operations in Israel), and at first
he was not aware of Le Roux's involvement with the
company. Id. Oz would later meet Le Roux and come to
understand that Le Roux controlled not only this Israeli
company, but RXL as a whole. See Id. However, their
relationship soured in 2009 after Le Roux allegedly lured Oz
to the Philippines, had his hitmen take Oz out on a boat,
throw him in the ocean, threaten to kill him, and shoot at
him in the water, all because Le Roux suspected Oz was being
“disloyal.” Id. at *2-3. Although Le
Roux did not ultimately kill Oz, he allegedly threatened
Oz's family and took numerous steps to
“remind” Oz of his ability to harm Oz and his
family anywhere in the world. Id. at *3. Remarkably,
Le Roux did not deny much of Oz's story and even
confirmed some details of it to the Government and the Court,
as did one of the alleged hitmen who participated in throwing
Oz off the boat. Oz planned to call Le Roux and the hitman at
trial and present this evidence as part of his duress
defense. Of course, when the Court granted his Rule 29
motion, that defense became moot.
Government viewed Oz as Le Roux's “go to”
lieutenant who oversaw most of the day-to-day operations of
RXL, including recruiting doctors and pharmacists, payments
to vendors, and efforts to secure and maintain relationships
with shippers. (See Gov't's Mem. in Opp. to
Oz's Application For Attorney's Fees
(“Gov't's Mem. in Opp.”) at 7-8 [Doc. No.
989].) The Government also believed that Oz was intimately
familiar with RXL's operations and practices and knew-or
should have known-that those practices consisted of conduct
that violated the Food, Drug, and Cosmetics Act
(“FDCA”) and Controlled Substances Act
(“CSA”). (See Id. at 9-27.) In contrast,
Oz portrayed himself as a sort of middle-management
information technology and operations employee, one with no
medical training or background and who worked for RXL after
2009 only under duress. Most importantly, Oz averred that at
all times he genuinely believed that RXL was complying with
the requirements of the FDCA and CSA and had no idea that
Fioricet was a controlled substance. (See Oz's
Mem in Supp. of Application for Attorney's Fees
(“Oz's Mem. in Supp.”) at 30-31 [Doc. No.
948]; Oz's Reply to Gov't's Opp. (“Oz's
Reply”) at 10-26 [Doc. No. 1032].) Of course, the
pertinent inquiry is whether evidence supported the
Government's theory of Oz's involvement with RXL and
his resulting intent and knowledge. This issue is discussed
2012, Le Roux was arrested in Liberia and extradited to the
United States as part of a sting orchestrated by the Drug
Enforcement Agency (“DEA”). United States v.
Oz, No. 13-cr-273 (SRN/JJK), 2016 WL 2595963, at *1-2
(D. Minn. Mar. 22, 2016), report and recommendation
adopted sub nom. United States v. Moran Oz, No.
13-cr-273 (SRN/JJK), 2016 WL 1948874 (D. Minn. May 3, 2016).
He quickly began cooperating with the Government, in relevant
part assisting with its ongoing investigation of RXL.
Id. at *3. For a time, this included Le Roux
continuing to finance and direct RXL's operations.
Id. However, Le Roux ultimately stopped financing
and communicating with RXL, after which the company ceased
2013, as part of his cooperation with the Government, Le Roux
contacted Oz- who was living in Israel-and offered to give Oz
money to pay severance packages for the recently terminated
Israeli employees of RXL. Oz agreed to meet Le Roux in
Romania to collect this money. Shortly after Oz arrived, he
was arrested by Romanian officials at the behest of the DEA.
Oz was held in a Romanian jail for nearly four months before
he was extradited to the United States. Once in the United
States, Oz was detained for an additional month before he was
released, but remained subject to strict limitations,
including an initial period of house arrest followed by GPS
monitoring and a curfew that continued through trial.
charged with 83 counts related to his involvement with RXL,
including misbranding under the FDCA, distribution of a
controlled substance and online sale of a controlled
substance under the CSA, mail and wire fraud, and conspiracy
counts. (See Indict.) Each count, other
than those for conspiracy, was premised on a controlled-buy
conducted by DEA investigators. For each buy, the Government
charged Oz with five counts: misbranding, mail fraud, wire
fraud, distribution of a controlled substance, and online
sale of a controlled substance. The Government dismissed some
of the charges against Oz prior to trial for a variety of
reasons, including its conclusion that some of the charges
were multiplicitous or should be dropped in the interest of
justice. (See Gov't's Mots. to Dismiss [Doc.
No. 395, 703].)
trial, Oz moved to dismiss the charges against him in part
based on the contention that Fioricet was not a controlled
substance. See United States v. Oz, No. 13-cr-273
(SRN/JJK), 2016 WL 1183041, at *2 (D. Minn. Mar. 28, 2016).
Fioricet is a controlled substance as defined by the CSA
because it contains butalbital, which is a derivative of
barbituric acid, which is listed as a Schedule III controlled
substance. Id. Neither Fioricet nor butalbital are
actually listed as controlled substances. See 21
U.S.C. § 812, Schedule III, Part (b)(1). The crux of
Oz's argument was that a DEA regulation, 21 C.F.R. §
1308.32 (hereinafter, the “Exempting
Regulation”), exempted Fioricet from treatment as a
controlled substance under the CSA. Oz, 2016 WL
1183041 at *3. The Court disagreed and held that the
Exempting Regulation applied solely to certain administrative
provisions of the CSA and that Fioricet remained a controlled
substance subject to the criminal provisions of that statute.
See Id. at *4-6.
Court also held that the Exempting Regulation did not make
the CSA unconstitutionally vague. See Id. at *6-7.
One reason for the Court's holding was that the CSA
contained a scienter requirement (sometimes referred to as
mens rea or intent), which mitigated against any risk of
vagueness. Id. at *7. Of course, confusion
surrounding the scope of the Exempting Regulation could
affect whether Oz had the requisite intent to violate the
CSA. For instance, Oz might have relied on representations by
others, including medical professionals, that Fioricet was
not a controlled substance- representations made at least in
part based on confusion regarding the effect of the Exempting
Regulation. It appears that the Government failed to
appreciate the significant detrimental impact such evidence
would have on its case, as shown through its subsequent
filings and arguments.
before trial, the Government moved to exclude any evidence
regarding Oz's mistaken belief that his conduct was
lawful. United States v. Oz, No. 13-cr-273
(SRN/FLN), 2017 WL 410534, at *1 (D. Minn. Jan. 30, 2017).
The Government asked that the Court exclude any argument or
testimony “attempting to establish defendants did not
specifically know their actions violated the law.”
Id. It made a more specific request that evidence of
Oz's mistaken belief that Fioricet was not a controlled
substance-based on the Exempting Regulation-be prohibited.
Id. Tellingly, the Government argued that the CSA
“only requires that [it] prove the defendants knowingly
distributed Fioricet, not that the defendants knew Fioricet
was a controlled substance.” Id. at *2
(alteration in original). Oz ...