UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,
Plaintiff-Appellee,

v.
                                                                           No. 00-10167
TUCOR INTERNATIONAL, INC.; TUCOR
                                                                           D.C. No.
INDUSTRIES, INC., dba Tucor                              CR-92-0425 DLJ
Moving & Storage Corporation;
LUZON MOVING & STORAGE                                OPINION
CORPORATION; GEORGE SCHULZE,
SR.; GEORGE SCHULZE, JR.,
Defendants-Appellants.

Appeal from the United States District Court
for the Northern District of California
D. Lowell Jensen, District Judge, Presiding

Argued and Submitted
December 13, 2000--San Francisco, California

Filed January 25, 2001

Before: David R. Thompson, Diarmuid F. O'Scannlain, and
A. Wallace Tashima, Circuit Judges.

Opinion by Judge Tashima

_________________________________________________________________
 

COUNSEL

Warren L. Dean, Jr., Washington, D.C., for the defendants-
appellants.

John J. Powers, III, Antitrust Division, U.S. Department of
Justice, Washington, D.C., for the plaintiff-appellee.

_________________________________________________________________

OPINION

TASHIMA, Circuit Judge:

Appellants are motor carriers and their officers who were
prosecuted for antitrust violations but were ultimately exoner-
ated, because their conduct was found to be covered by an

                               1164
antitrust immunity provision of the Shipping Act of 1984, 46
U.S.C. app. SS 1701--1719. Appellants then moved for attor-
ney's fees and costs under the Hyde Amendment. Pub. L. No.
105-119, Title VI, S 617, 111 Stat. 2519 (1997), reprinted in
18 U.S.C. S 3006A (historical and statutory notes). The dis-
trict court denied the motion. We have jurisdiction of this
timely appeal under 28 U.S.C. S 1291, and we affirm.

I. BACKGROUND

A. Factual Background and Prior Proceedings 

When American military personnel serving abroad are relo-
cated to the United States, the government makes arrange-
ments for the shipping of their belongings. The government
contracts for "through transportation," which means that the
belongings are transported under a single bill of lading from
their point of origin to their final destination, although trans-
portation along different segments of the route is often pro-
vided by different carriers using different modes of carriage.

Appellants are engaged in the business of motor transporta-
tion within the Philippines. As part of the through transporta-
tion of the belongings of American military personnel
returning from the Philippines, Appellants trucked the belong-
ings from Subic Bay Naval Base and Clark Air Force Base to
a Philippine seaport, where the belongings were loaded onto
vessels bound for the United States. Appellants were indicted
on September 9, 1992, for violating Section 1 of the Sherman
Act, 15 U.S.C. S 1, by conspiring to fix prices.

Appellant Tucor Industries, Inc. is a Philippine corporation.
Pursuant to a plea agreement, Tucor pleaded guilty to the
Sherman Act charge and was fined $121,800. Judgment was
entered on June 22, 1993. In 1997, Tucor filed a petition for
a writ of error coram nobis, seeking to have the judgment
vacated.

                               1165
Appellants Luzon Moving and Storage Corp. and
Philippine-American Moving and Storage Corp. (PAMSC)
are Philippine corporations. Appellants George Schulze, Sr.,
and George Schulze, Jr., are officers and shareholders of
Luzon and PAMSC. These Appellants never appeared before
the district court for arraignment, but in 1997 they made a
special appearance in order to move to dismiss the indictment.

The district court granted the petition for writ of error
coram nobis, vacated the judgment against Tucor, and granted
the motion to dismiss the indictment of Luzon, PAMSC, and
the Schulzes. United States v. Tucor Int'l, Inc. , 35 F. Supp. 2d
1172, 1189 (N.D. Cal. 1998) (Tucor I), aff'd, 189 F.3d 834
(9th Cir. 1999). The court held that because Appellants pro-
vided ground transportation solely within the Philippines,
those activities were immunized against antitrust liability by
Section 7(a)(4) of the Shipping Act of 1984, 46 U.S.C. app.
S 1706(a)(4) (providing that "[t]he antitrust laws do not apply
to . . . any agreement or activity concerning the foreign inland
segment of through transportation that is part of transportation
provided in a United States import or export trade"). Id. at
1182--83. We affirmed. United States v. Tucor Int'l Inc., 189
F.3d 834, 838 (9th Cir. 1999) (Tucor II).

Both in the district court and on appeal, the government
argued unsuccessfully that the Shipping Act's antitrust immu-
nities did not apply to Appellants because the immunities
should be limited to entities that are "ocean common carri-
ers," as that term is defined in Section 3 of the Shipping Act,
46 U.S.C. app. S 1702(6), (16). Appellants are concededly not
ocean common carriers, but both Tucor I and Tucor II held
that the relevant exemption is not limited to ocean common
carriers.

Appellants next brought a motion in the district court for
attorney's fees and costs under the Hyde Amendment, which
provides that a court may award fees and costs to a prevailing
criminal defendant if the court "finds that the position of the

                               1166
United States was vexatious, frivolous, or in bad faith, unless
the court finds that special circumstances make such an award
unjust." 18 U.S.C. S 3006A (historical and statutory notes).
The district court denied the motion, finding both that the
government had a good-faith but erroneous belief in the cor-
rectness of its interpretation of the Shipping Act and that the
government's interpretation was not so clearly contrary to the
statutory language as to render the prosecution vexatious or
frivolous. This timely appeal followed.

B. The Greek Case

Some of Appellants' arguments are based on what they
refer to as "the Greek case," a separate antitrust investigation
that was taking place at the same time that Appellants were
being prosecuted. When Hellenikon Air Force Base in Greece
was closed in 1990, the government arranged for through
transportation of the belongings of returning Hellenikon per-
sonnel, just as it did for personnel returning from the Philip-
pines. The Department of Justice conducted an investigation
of potential antitrust violations in Greece that paralleled those
alleged in Appellants' case--agreements among carriers han-
dling the foreign inland segment of through transportation. On
February 9, 1993, Warren L. Dean, Jr., an attorney for one of
the Greek inland carriers under investigation, met with coun-
sel for the government and argued that Section 7 immunized
his client's activities against antitrust liability. Dean provided
the government with a written analysis to the same effect on
February 17, 1993.

The Department of Justice was thus made aware of the rele-
vance of the Shipping Act's antitrust exemptions four months
before Tucor's plea hearing, but it did not disclose the poten-
tial applicability of those provisions to the district court or to
Tucor. On December 1, 1993, the government decided not to
prosecute the Greek carriers. Appellants infer from this that
the government agreed with Dean's interpretation of the Ship-
ping Act, recognized that the Greek carriers were immune,

                               1167
and thus also recognized that Appellants were immune. In
Tucor I, the district court largely rejected these arguments,
finding (1) that "the government had not concluded at the
time of Tucor's plea that Section 7(a)(4) immunized Tucor
from prosecution," (2) that Tucor had failed to prove selective
prosecution, but (3) that the government had probably vio-
lated its duty of candor to the court by failing to bring the
immunity provisions to the court's attention. Tucor I, 35 F.
Supp. 2d at 1188.

II. STANDARD OF REVIEW

A district court's denial of a motion for attorney's fees
under the Hyde Amendment is reviewed for abuse of discre-
tion. United States v. Lindberg, 220 F.3d 1120, 1124 (9th Cir.
2000). Under that standard, this court cannot reverse unless it
has a definite and firm conviction that the district court com-
mitted a clear error of judgment. Id. The district court abuses
its discretion when it makes an error of law, Koon v. United
States, 518 U.S. 81, 100 (1996), or bases its conclusion on a
clearly erroneous finding of fact, Paradis v. Arave, 130 F.3d
385, 390 (9th Cir. 1997).

III. DISCUSSION

To a large extent, Appellants' arguments hinge on the rea-
sonableness of the government's now-discredited theory that
the Shipping Act's antitrust immunity provisions do not apply
to Appellants. Appellants also contend that that theory contra-
dicts the position successfully advocated by the government
in an earlier case, Transpacific Westbound Rate Agreement v.
Federal Maritime Commission, 951 F.2d 950 (9th Cir. 1991),
thus conflicting with both binding precedent and the govern-
ment's prior interpretation of the Act. We analyze these broad
issues first, before turning to Appellants' other, narrower
arguments.

                               1168
A. The Shipping Act and Appellee's Interpretation of
the Antitrust Immunities

Section 3 of the Shipping Act defines "common carrier" as
follows:

      "[C]ommon carrier" means a person holding itself
      out to the general public to provide transportation by
      water of passengers or cargo between the United
      States and a foreign country for compensation that--

      (A) assumes responsibility for the transpor-
      tation from the port or point of receipt to
      the port or point of destination, and

      (B) utilizes, for all or part of that transpor-
      tation, a vessel operating on the high seas
      or the Great Lakes between a port in the
      United States and a port in a foreign coun-
      try . . . .

46 U.S.C. app. S 1702(6). "Person" is defined to include "in-
dividuals, corporations, partnerships," and other associations
recognized by law. Id. S 1702(18). An "ocean common carri-
er" is defined as a "vessel-operating common carrier." Id.
S 1702(16).

Section 4 of the Act, entitled "Agreements within scope of
chapter," provides that the Act applies to "agreements by or
among ocean common carriers" regarding certain specified
activities, and also to a narrower range of "agreements among
marine terminal operators." Id. S 1703(a), (b). Section 5 then
provides that a true copy of any agreement covered by Section
4 must be filed with the Federal Maritime Commission
(FMC), but Section 5 also creates an exception to the filing
requirement for "agreements related to transportation to be
performed within or between foreign countries and agree-

                               1169
ments among common carriers to establish, operate, or main-
tain a marine terminal in the United States." Id. S 1704(a).

Section 7 then lists certain agreements and activities to
which "[t]he antitrust laws do not apply. " Id. S 1706(a). In
particular, Sections 7(a)(1) and 7(a)(2) essentially immunize
all agreements filed under Section 5. Id.S 1706(a)(1)--(2).
Section 7(a)(4), which in Tucor II was held to apply to Appel-
lants' conduct, immunizes "any agreement or activity con-
cerning the foreign inland segment of through transportation
that is part of transportation provided in a United States
import or export trade." Id. S 1706(a)(4). Section 7(a)(4) does
not make any explicit reference to common carriers or to
ocean common carriers. Also, it deals only with foreign-to-
foreign transportation ("the foreign inland segment of through
transportation"), whereas the Act defines "common carrier" in
terms of transportation between the United States and a for-
eign country.

These considerations tend to make the government's posi-
tion in Tucor I and Tucor II, namely, that the grant of immu-
nity in Section 7(a)(4) applies only to ocean common carriers,
look unreasonable. But the government's position gains at
least some measure of reasonableness when it is understood
in terms of the following general underlying premise: Accord-
ing to the government, the antitrust immunities granted by the
Shipping Act were intended to be limited to the entities, activ-
ities, and agreements that are brought within the FMC's regu-
latory jurisdiction by the Act. In essence, the point of Section
7(a)(4), according to the government, is to immunize agree-
ments (and consequent activities) that are within the scope of
the Act under Section 4 but that fall within Section 5(a)'s
exception for foreign-to-foreign agreements among ocean
common carriers. Because such agreements are not required
to be filed under Section 5(a), they are not immunized by Sec-
tions 7(a)(1) and 7(a)(2). The purpose of Section 7(a)(4),
according to the government, is to fill part of that gap, but as

                               1170
a result it is limited to agreements (and consequent activities)
among ocean common carriers.

[1] These considerations do not, of course, entirely resolve
the tensions between the statutory text and the position that
the government advocated, and its interpretation of Section
7(a)(4) was ultimately rejected by this court in Tucor II. But
placed in the context of the government's understanding of
the interplay between the regulatory scope of the Shipping
Act and the antitrust immunities that the Act provides, the
government's interpretation of Section 7(a)(4) does not seem
nearly as contrary to the plain meaning of the statute as it
might appear on first look. Other than repeatedly asserting
that the government's position is obviously at odds with the
statutory text, Appellants have presented no arguments to
show that the district court abused its discretion in finding that
that position "was not so obviously wrong as to be frivolous."

B. Transpacific

In 1987, the FMC proposed a rule that would have allowed
voluntary filing of agreements that are not subject to the filing
requirement of Section 5(a). 52 Fed. Reg. 46,501 (proposed
Dec. 8, 1987). Under the proposed rule, such voluntarily filed
agreements would thereby be brought within the Section
7(a)(1)--(2) antitrust immunity for filed agreements. Id.

After receiving comments from various parties, including
vigorous opposition from the Department of Justice, the FMC
withdrew the proposed rule. The FMC reasoned that an entity
is a common carrier only insofar as it provides transportation
services between the United States and a foreign country--
when such a carrier provides foreign-to-foreign transportation
services, it does not, as regards those services, qualify as a
common carrier under the Act. Thus, agreements concerning
foreign-to-foreign transportation are not agreements within
the scope of the Act under Section 4, because they are not
agreements among common carriers (i.e., for purposes of

                               1171
those agreements, the parties are not acting as common carri-
ers). See Transpacific, 951 F.2d at 953. On this basis, the
FMC issued an order in which it held that it had jurisdiction
only over agreements concerning transportation between the
United States and a foreign country. The order rejected the
concept of voluntary filing and stated that an agreement that
concerned both regulated and unregulated activity (a "mixed
agreement") could no longer be filed in its entirety. Thus,
only those portions of a mixed agreement that concerned
United States--to-foreign transportation could be filed and
thereby brought within the antitrust immunity provisions of
Section 7(a)(1)--(2). See Transpacific, 951 F.2d at 952.

The Transpacific Westbound Rate Agreement, an associa-
tion of ocean common carriers, challenged the FMC's order.
Transpacific argued that the FMC did have jurisdiction over
the foreign-to-foreign portions of mixed agreements and, in
the alternative, defended the concept of voluntary filing.
Transpacific, 951 F.2d at 952. The Department of Justice and
the FMC jointly filed a brief in support of the order. This
court found no error in the FMC's interpretation of the Ship-
ping Act and upheld the FMC's order. Transpacific, 951 F.2d
at 957.

Appellants now argue that the government's position in
Transpacific conflicts with the government's position in the
Tucor prosecution, for the following reasons: In Transpacific,
the government defended the FMC's position that an entity
qualifies as a common carrier only insofar as it engages in
United States--to-foreign transportation. Section 7(a)(4), the
antitrust immunity provision at issue in the Tucor prosecution,
concerns only foreign-to-foreign transportation. Therefore,
under the reasoning successfully advocated by the govern-
ment in Transpacific, Section 7(a)(4) cannot apply to com-
mon carriers. But the government contended throughout the
Tucor prosecution that Section 7(a)(4) applies to common car-
riers and to no one else.

                               1172
This argument amounts to nothing more than a terminologi-
cal confusion. The government's position in the Tucor prose-
cution was that the immunity provisions in Section 7 apply
only to entities that engage in some common carrier activity,
that is, to entities that do qualify as common carriers for at
least some of the transportation services that they provide. On
this reading, Section 7(a)(4) immunizes any agreements
among such entities that concern foreign-to-foreign transpor-
tation. It is true that, under the reasoning of Transpacific,
those entities are not common carriers for purposes of those
agreements. But the government's position in the Tucor pros-
ecution was simply that those entities would not be eligible
for the Section 7(a)(4) immunity if they were not common
carriers for purposes of some other transportation services that
they provide.

[2] There is no substantive conflict between that position
and the position successfully advocated by the government in
Transpacific. At most, Appellants' argument shows that the
government should have used the term "common carrier"
more carefully in describing its position in the Tucor prosecu-
tion. Instead of saying that Section 7(a)(4) applies only to
ocean common carriers, the government should have said that
Section 7(a)(4) applies only to entities that engage in some
activity that qualifies them as ocean common carriers with
respect to that activity, although the activity that makes them
ocean common carriers is not itself immunized by Section
7(a)(4).

Moreover, some of the reasoning of Transpacific  actually
supports the underlying premise of the government's position
in the Tucor prosecution, namely, that the scope of the anti-
trust immunities granted by the Act should be tied to the regu-
latory jurisdiction conferred on the FMC by the Act. In
Transpacific, we reasoned that because the Act describes the
FMC's regulatory powers as limited to common carriers, it is
unlikely that the Act was meant to confer antitrust immunity
on any entities that are not common carriers. See 951 F.2d at

                               1173
954. "It does not seem logical that Congress intended to con-
fer antitrust immunity on parties largely outside of the regula-
tory power of the FMC . . . ." Id. In this way, the reasoning
of Transpacific actually embraces, rather than conflicts with,
the position advocated by the government in the Tucor prose-
cution. Transpacific thus makes the government's position in
the Tucor prosecution look more plausible than it otherwise
would; it does not undermine it.

For all of these reasons, we reject Appellants' argument
that the government's position in the Tucor prosecution was
contrary to the position successfully advocated by the govern-
ment in Transpacific.

C. Appellants' Remaining Arguments

1. Failure to Apply the Terms of the Hyde Amend-
ment Disjunctively

Under the Hyde Amendment, a court may award fees and
costs to a prevailing criminal defendant if 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." 18 U.S.C. S 3006A (historical
and statutory notes). The plain meaning of the text indicates
that the test is disjunctive--satisfaction of any one of the three
criteria (vexatiousness, frivolousness, or bad faith) should suf-
fice by itself to justify an award. Appellants argue that the dis-
trict court failed to apply the test in this way, instead holding
Appellants to a single "generalized burden of proof."

[3] The argument is without merit. The district court
engaged in a detailed analysis of the text of the Hyde Amend-
ment, including separate definitions of the terms "vexatious,"
"frivolous," and "bad faith." The district court stated that it
had already found, in Tucor I, that "the government honestly
believed at the plea hearing that the conduct in the Indictment
was prohibited by law and did not fall within the immunity

                               1174
clauses of the Shipping Act." That factual finding negates bad
faith. The district court further concluded that "the legal posi-
tion taken by the government was a defensible one in a first
impression circumstance." That conclusion is sufficient to
establish that the prosecution was neither vexatious nor frivo-
lous, on any understanding of those terms.1 For all of these
reasons, Appellants' argument fails.

2. Failure to Treat the Statute as "Binding Precedent"

[4] Appellants argue that the district court erred by "requir-
[ing] that the prosecution be foreclosed by binding judge-
made law," rather than treating the "clear and unambiguous
statutory language" of the Shipping Act as "binding prece-
dent." The argument is without merit. As the district court
explicitly stated, "The Court is satisfied that the legal position
taken by the government in this case was not foreclosed by
binding precedent and that it was not so obviously wrong as
to be frivolous." (emphasis added) (citation omitted). The
emphasized portion indicates that the court did consider the
reasonableness of the government's position independently of
the absence of contrary case law. The district court did not
ignore the statutory language--it just found the statute to be
somewhat less clear and unambiguous than Appellants claim
it is. Analyses of both the statute and the government's inter-
pretation of it indicate that the district court did not abuse its
discretion in so finding. See Part III.A, supra.
_________________________________________________________________
1 There is no Ninth Circuit case law on the Hyde Amendment that spells
out precisely what the terms "vexatious,""frivolous," and "bad faith"
mean. The court in Lindberg noted this lacuna but saw no need to fill it,
because on any plausible interpretation of those terms, the district court in
that case had not abused its discretion. Lindberg, 220 F.3d at 1125 (citing
cases from the Fourth and Eleventh Circuits that have analyzed the terms,
but declining to reach the issue). The instant case is similar.

                               1175
3. The Government's Allegedly Unethical Conduct

Appellants argue (1) that the government learned of the
applicability of Section 7(a)(4) through its investigation of the
Greek case, (2) that the government intentionally violated its
ethical duties by withholding this exculpatory information
from both Appellants and the district court, and (3) that the
district court erred by failing to find that such intentional
unethical behavior was vexatious, frivolous, or in bad faith.
We are unpersuaded by Appellants' argument.

[5] The district court found in Tucor I and reaffirmed in
this case that "the government honestly believed at the plea
hearing that the conduct in the Indictment was prohibited by
law and did not fall within the immunity clauses of the Ship-
ping Act." (citing Tucor I). In Tucor I, the district court based
this finding of fact on the declaration of a Department of Jus-
tice attorney who was involved in both the Greek case and the
Tucor prosecution. See Tucor I, 35 F. Supp. 2d at 1187--88.
The district court was fully aware of the circumstances of the
Greek case. See id. at 1187. The court was under no obliga-
tion to conclude that the government's reason for not prose-
cuting the Greek carriers was that the government believed
that Section 7 barred such prosecution, and the court explic-
itly declined to draw any such inference. Id.  at 1188 ("Any
number of factors could have been involved in the govern-
ment's decision not to prosecute the Greek companies that
were under investigation."). In effect, Appellants' argument
merely repeats the facts of the Greek case and asks this court
to make factual findings contrary to those made by the district
court. Appellants have given us no reason to conclude that the
district court's findings were clearly erroneous.

[6] Because the government honestly believed that the Sec-
tion 7 immunities did not apply in the Tucor prosecution, the
decision to prosecute was not in bad faith. In addition, Appel-
lants have failed to explain how the government's failure to
disclose legal authority that the government believed to be

                               1176
irrelevant could make the decision to prosecute vexatious or
frivolous.2 Appellants have not shown that the government's
interpretation of the Shipping Act was so unreasonable as to
deprive the government of probable cause to prosecute. Nor
could a finding of vexatiousness or frivolousness be based on
the claim that this court had already ruled against the govern-
ment's position, because the result and the reasoning of
Transpacific were in fact consistent with, and at least partially
supportive of, the government's position in the Tucor prose-
cution.

Nonetheless, there remains the district court's suggestion in
Tucor I that the government's failure to inform the court
about the Section 7 immunities might constitute an ethical
violation. See Tucor I, 35 F. Supp. 2d at 1188 (noting that the
government's failure to inform the court about the immunities
"represents a far too restrictive view of prosecutorial obliga-
tions"). But in ruling on the Hyde Amendment motion, the
district court explained that its remarks in Tucor I were meant
only "as an assessment of faulty judgment by the govern-
ment," not as an indication that the government's conduct
"was intended to defraud the Court." On any plausible inter-
pretation of the Hyde Amendment standard, mere "faulty
judgment" is not vexatious, frivolous, or in bad faith. Appel-
lants have not shown that the district court's finding of "faulty
judgment," as opposed to intentional fraud, was an abuse of
discretion.
_________________________________________________________________
2 Appellants attempt to characterize the government's conduct as akin to
a violation of Brady v. Maryland, 373 U.S. 83 (1963), but this argument
is without merit. Brady held that prosecutors have a constitutional duty to
disclose exculpatory evidence to criminal defendants. See id. at 87. Appel-
lants have cited no authority for the proposition that prosecutors are under
any duty, legal or ethical, to disclose relevant legal authority to criminal
defendants, and we are aware of none. Prosecutors, like all lawyers, have
an ethical duty to disclose relevant legal authority to the court, but that has
nothing to do with Brady. See, e.g., Model Rules of Prof'l Conduct R. 3.3
(1995).

                               1177
4. Different Interpretations of the Indictment

In opposing Appellants' motion for fees and costs before
the district court, the government argued that its interpretation
of the indictment was broader than the district court's and the
Ninth Circuit's, and that the government consequently
believed that the indictment related in part to conduct that was
not considered by the courts and that was clearly not protected
by the Section 7 immunity provisions. The government
offered this argument to negate bad faith, and the district
court appears to have approved of the argument to some
extent. Appellants argue that this was error. We need not,
however, and do not decide the merits of this contention.

The government's argument regarding its interpretation of
the indictment related only to bad faith, and that is how the
district court treated it. But lack of bad faith is already estab-
lished by the district court's finding that the government hon-
estly believed that the Section 7 immunities did not apply to
Appellants. Appellants' attack on the government's other
argument regarding bad faith does not undermine that conclu-
sion.

IV. CONCLUSION

For the foregoing reasons, we conclude that the district
court did not abuse its discretion in finding that the position
of the United States was not vexatious, frivolous, or in bad
faith. The decision of the district court is therefore

AFFIRMED.

                               1178