United States v. Braunstein

David Braunstein (defendant) bought and resold computers. Braunstein purchased computers from an Apple Computer, Inc. (Apple) subsidiary, Apple Latin America Company (ALAC), and resold them at a discount. ALAC oversaw Apple’s Latin America sales. Braunstein was known as a distributor for Mexico but sold most of his inventory to another American reseller. Braunstein was a significant buyer for ALAC, which operated on commission. Apple became concerned with gray marketing—the sale of Apple products beyond the territory where they were intended to sell, at lower prices than Apple would permit. A private investigator hired by Apple reported gray marketing occurred at ALAC. The United States Attorney’s Office (plaintiff) began investigating Braunstein’s business with ALAC. Braunstein’s counsel wrote a letter to the assistant United States attorney (AUSA) arguing Braunstein had done nothing illegal and pointing to sources within Apple and ALAC that would prove ALAC knew Braunstein was selling products in the United States. The AUSA interviewed several employees, one of whom stated Braunstein was allowed to sell in the United States. A supervisor stated ALAC was aware of the gray-market practices. A federal grand jury was convened and indicted Braunstein on multiple fraud-related crimes. A conviction under these crimes required a showing that Braunstein used fraud or deception against ALAC to sell in the United States. After ongoing trial delays, the court dismissed the indictment. Braunstein filed a motion to recover attorney’s fees under the Hyde Amendment. The district court denied Braunstein’s motion, finding the prosecution was not frivolous. Braunstein appealed.