                            NOT FOR PUBLICATION                          FILED
                      UNITED STATES COURT OF APPEALS                     AUG 16 2016
                                                                     MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                            FOR THE NINTH CIRCUIT



    UNITED STATES OF AMERICA,                     No.   15-30152

                   Plaintiff-Appellee,            D.C. No.
                                                  3:13-cr-00092-RRB-5
     v.

    STACY F. LAULU,                               MEMORANDUM*

                   Defendant-Appellant.

                     Appeal from the United States District Court
                              for the District of Alaska
                     Ralph R. Beistline, District Judge, Presiding

                        Argued and Submitted August 2, 2016
                                Anchorage, Alaska

Before: FISHER, PAEZ, and HURWITZ, Circuit Judges.

          Stacy Laulu was convicted after a jury trial of two counts of wrongful

disclosure of individually identifiable health information with intent to use that

information for “personal gain, or malicious harm.” 42 U.S.C. § 1320d-6(a)(3),

(b)(3) (a felony violation of the Health Insurance Portability and Accountability Act

(“HIPAA”)). A co-defendant, Stuart Seugasala, had brutally assaulted a man who


*
      This disposition is not appropriate for publication and is not precedent except
as provided by Ninth Circuit Rule 36-3.
allegedly owed a confederate $50,000 for drugs. Two days later, Seugasala shot a

second victim. He then contacted Laulu—a financial consultant at the hospital

where the victims were treated—and asked about the victims’ injuries and whether

they had identified their attackers. Laulu accessed hospital records and provided

information from those records to Seugasala, with whom Laulu’s husband had

previously been associated.

      Laulu and Seugasala were tried jointly. In addition to the two felony HIPAA

violation counts with which Laulu was charged, Seugasala was also charged with

drug conspiracy, kidnapping, and use of a firearm in furtherance of drug trafficking.

Laulu challenges the district court’s admission against her of a video of the assault,

which vividly depicted Seugasala forcibly sodomizing a bound and gagged victim

with a hot curling iron while the victim begged for his life.1 We conclude that the

video should not have been admitted against Laulu, and that the government failed

to meet its burden to establish harmlessness.2


1
      Seugasala had videotaped the assault to show others “what happens when
people owe me money.”
2
       The parties dispute whether Laulu objected only to the admission of the video
or whether she objected generally to the admission of Seugasala’s bad acts. Because
we reverse on the admission of the video alone, we need not decide whether the
district court erred by introducing the other evidence against Laulu without a proper
limiting instruction. We express no view on the admissibility of that evidence, but
expect the district court will exercise its discretion as usual under Federal Rules of
Evidence 401 and 403 in light of this disposition when considering what evidence
to admit at Laulu’s new trial.

                                          2
      1.     Evidence is relevant if “it has any tendency to make a fact more or less

probable than it would be without the evidence,” and “the fact is of consequence in

determining the action.” Fed. R. Evid. 401(a), (b). But, even relevant evidence

should be excluded “if its probative value is substantially outweighed by a danger of

. . . unfair prejudice . . . [or] misleading the jury.” Fed. R. Evid. 403. The video at

issue was singularly gruesome, and was admitted not only against Seugasala but also

against Laulu.    The district court found it relevant to “offer a coherent and

comprehensible story regarding the commission of [the] crime.”

      2.     A felony HIPPA violation is established when a defendant “discloses

individually identifiable health information to another person . . . with intent to sell,

transfer, or use [that information for] . . . personal gain, or malicious harm.” 42

U.S.C. § 1320d-6(a)(3), (b)(3). The only contested issue in the case against Laulu

was whether she made the disclosures to Seugasala with the requisite statutory

intent. Laulu was not involved in the sexual assault, and had neither seen the video

nor knew of its existence. Because the video did not “go to any of the elements of

the crime with which [Laulu] was charged, we must consider its probative value

low.” United States v. Gonzalez-Flores, 418 F.3d 1093, 1098 (9th Cir. 2005).

      3.     “Where the evidence is of very slight (if any) probative value, it’s an

abuse of discretion to admit it if there’s even a modest likelihood of unfair prejudice

or a small risk of misleading the jury.” Id. at 1098 (citation omitted). “Unfair


                                           3
prejudice” “speaks to the capacity of some concededly relevant evidence to lure the

factfinder into declaring guilt on a ground different from proof specific to the offense

charged.” Old Chief v. United States, 519 U.S. 172, 180 (1997). Given the grisly

and violent nature of the videotape—which an experienced probation officer

testified he was “still disturbed by” over a year and a half after viewing it—its

introduction against Laulu “very well could have triggered an emotional response

from the jury members,” Gonzalez-Flores, 418 F.3d at 1099, and encouraged them

to convict Laulu based on her association with Seugasala instead of on the facts

related to the HIPAA charges. This risk was exacerbated by the government’s

repeated invitations to the jury to connect Laulu to Seugasala’s brutal conduct. See

id. The district court’s instruction that the jury should “disregard[] any evidence

admitted solely against another defendant” did not cure the risk of prejudice against

Laulu because the video was not admitted solely against Seugasala.

      4.     “We must reverse unless there is a fair assurance of harmlessness or,

stated otherwise, unless it is more probable than not that the error did not materially

affect the verdict.” United States v. Morales, 108 F.3d 1031, 1040 (9th Cir. 1997)

(en banc) (citation and quotation marks omitted).          “The burden to show the

harmlessness of the error is on the government.” Gonzalez-Flores, 418 F.3d at 1099.

The government does not advance a harmless error argument; it instead contends

that the tape was properly admitted against Laulu. “If the harmlessness of the error


                                           4
is at all debatable, prudence and fairness to the defendant counsel against deeming

that error harmless without the benefit of the parties’ debate.” Id. at 1101. Here,

Laulu’s sole defense to the charges against her was that she lacked the requisite

intent. In support, she offered her statements to investigators and the testimony of

witnesses on cross-examination that Seugasala had been giving Laulu money for a

year before the HIPAA violations. The government conceded at closing argument

there was no quid pro quo agreement underlying Laulu’s disclosure of the victims’

medical information. But for the introduction of the video, the jury may have

believed Laulu’s claim she disclosed the victims’ medical information to Seugasala

as a favor, without the intent to personally gain or cause malicious harm to the

victims.3 We therefore vacate Laulu’s conviction and remand for a new trial.

      VACATED and REMANDED.




3
       The government argues the video was not more prejudicial than other
evidence of Seugasala’s acts admitted against Laulu. Even if we construe this as an
argument any error was harmless, the government’s burden means that when we
“find ourselves in equipoise as to the harmlessness of the error, reversal is required.”
Gonzalez-Florez, 418 F.3d at 1099.

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