United States v. Melvin Shields, 844 F.3d 819

From 2006–2009 Shields, Sims, and Stafford ran S3 Partners, soliciting millions from investors for real estate projects (Stagecoach and Alafia) that ultimately failed.
Investors were told funds would be used for specific projects and promised returns (e.g., Alafia: guaranteed 15%); in fact, S3 commingled and diverted funds to other projects and expenses.
Stafford pleaded guilty and testified; Shields was tried and convicted on 32 counts (conspiracy, wire, bank, securities fraud, false bank statement); Sims convicted on 2 wire fraud counts. Sentences: Shields 78 months, Sims 30 months.
Defendants appealed, challenging evidentiary rulings, joinder, counsel effectiveness, jury instructions, and right to be present; this opinion addresses jury-instruction error on omissions theory of wire fraud.
The district court used the Ninth Circuit Model Wire Fraud instruction, which allowed conviction based on material omissions without instructing that a duty to disclose is required.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether jury must find duty to disclose for wire fraud based on omission	Gov: omissions can support wire fraud if material and intentional	Shields/Sims: conviction improper because no duty to disclose existed between them and investors	Court: Jury must be instructed that omission-based wire fraud requires a relationship creating a duty to disclose (formal or "informal trusting" relationship)
Whether failure to give duty-to-disclose instruction was plain error	Gov: no plain error; model instruction used and not clearly required then	Defs: omission could have affected verdict; they had no duty to disclose bankruptcies etc.	Court: Error occurred but not reversible plain error — not "clear and obvious" and likely did not affect outcome
Whether omissions cited (e.g., bankruptcies) could have driven conviction	Gov: omissions were material given defendants' representations and investor testimony that knowledge would matter	Defs: investors lacked a fiduciary relationship so omissions shouldn’t support conviction	Court: Even if omissions were considered, record contains numerous affirmative misrepresentations and diversions supporting convictions
Standard of review for unobjected-to instruction error	Gov: plain-error review applies	Defs: same but contend outcome affected	Court: Applied plain-error test and declined to reverse under that standard

Eller v. EquiTrust Life Ins. Co., 778 F.3d 1089 (9th Cir. 2015) (non-disclosure supports fraud only when an independent duty to disclose exists)
Chiarella v. United States, 445 U.S. 222 (U.S. 1980) (relationship of trust and confidence required to create duty to disclose in securities context)
United States v. Dowling, 739 F.2d 1445 (9th Cir. 1984) (non-disclosure as basis for fraud requires an independent duty; mail/wire fraud principles interchangeable)
United States v. Laurienti, 611 F.3d 530 (9th Cir. 2010) (district court erred by not instructing jury that broker-client trust relationship was required for omission-based securities fraud)
United States v. Milovanovic, 678 F.3d 713 (9th Cir. 2012) (defines fiduciary/duty broadly to include informal trusting relationships; jury must decide existence of such duty)
United States v. Shipsey, 363 F.3d 962 (9th Cir. 2004) (mail and wire fraud case law are applicable interchangeably)
United States v. Fuchs, 218 F.3d 957 (9th Cir. 2000) (plain-error reversal for failure to instruct on statute of limitations when error was clear and outcome affected rights)