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US Court of Appeals
FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CHARLES H. KEATING,
                                                     No. 98-55468
Petitioner-Appellee,
                                                     D.C. No.
v.
                                                     CV-98-00578-JDG
ROBERT HOOD; ATTORNEY
                                                     ORDER AND
GENERAL OF THE STATE OF
                                                     AMENDED
CALIFORNIA,
                                                     OPINION
Respondents-Appellants.


Appeal from the United States District Court
for the Central District of California
John G. Davies, District Judge, Presiding


Argued and Submitted
November 5, 1998--Pasadena, California


Filed September 16, 1999
Amended October 19, 1999


Before: Robert Boochever, Stephen Reinhardt, and
Pamela Ann Rymer, Circuit Judges.


Opinion by Judge Reinhardt;
Partial Concurrence and Partial Dissent by Judge Rymer


_________________________________________________________________




SUMMARY

The summary, which does not constitute a part of the opinion of the court,
is copyrighted C 1999 by West Group.
_________________________________________________________________


Criminal Law and Procedure/Jury Instructions

The court of appeals affirmed a judgment of the district
court. The court held that under principles of due process and


                               12691


California law, it is prejudicial error to omit the mens rea ele-
ment from a jury instruction defining the offense of securities
fraud.


A California indictment charged appellee Charles Keating
with violating Cal. Corp. Code SS 25401 and 15540, which
make it a criminal offense to offer or sell a security "by means
of any written or oral communication which includes an
untrue statement of material fact necessary in order to make
the statements made, in light of the circumstances under
which they were made, not misleading." The state's essential
contention was that Keating failed to inform bond sellers of
the poor financial condition of American Continental Corpo-
ration, Keating's entity, and of the riskiness of the ACC bonds
the sellers sold to investors.


Relying on an alter ego theory, the prosecution requested
jury instructions on both direct and indirect perpetrator theo-
ries of liability. The defense insisted that because there was
no evidence that Keating had personally sold or offered the
securities to purchasers, he could be convicted only as an
aider and abettor.


In response to the trial court's skepticism regarding the
State's direct perpetrator theory, the prosecutor cited evidence
that it was Keating who was the source of the terms of the
offer, its interest and maturity rates, and the financial informa-
tion provided with it. The trial court was unconvinced. The
prosecutor promised to argue the case only under an aider and
abettor theory.


The trial court's jury instructions outlined two possible
bases for Keating's criminal liability under SS 25401 and
15540: as a direct perpetrator or as an aider and abettor. The
court instructed the jury that Keating could be convicted as an
aider and abettor only if it found that he had knowledge of the
falsity of the information conveyed by the bond seller, or that
he intended to facilitate, encourage, or promote the untrue


                               12692


statements or omissions. With respect to the direct perpetrator
theory, no instruction required a mens rea finding.


The jury returned a verdict finding Keating guilty of 17
counts of selling securities by means of false statements or
omissions. The verdict did not specify whether the jury found
Keating guilty as a direct perpetrator or as an aider and abet-
tor.


The California Court of Appeal affirmed, holding that
although the trial court had presented the case to the jury with
instructions that conviction was possible under theories of
direct or aider and abettor liability, the jurors must have
known that Keating was being tried on the theory that he
aided and abetted in the sales of the junk bonds.


The California Supreme Court granted Keating's petition
for review. While review was pending, the court decided in
another case that knowledge of the falsity or misleading
nature of a statement or the materiality of an omission is
required in a prosecution under SS 25401 and 15540. In Keat-
ing's case, the court dismissed his petition as improvidently
granted.


In 1995, Keating sought federal habeas corpus relief. The
district court granted his petition on two grounds: that the fail-
ure to include a mens rea requirement in the direct perpetrator
instruction violated due process because it eliminated an
essential element of the offense from the jury's consideration,
and that this omission also infected Keating's conviction by
allowing the jury to convict him as an aider and abettor with-
out finding that the direct perpetrator had the requisite crimi-
nal intent.


On appeal by the State, the court of appeals dismissed
Keating's petition without prejudice on the ground that he had
failed to exhaust his secondary claim that the absence of a
mens rea element in the direct perpetrator instruction had


                               12693


invalidated any conviction based on the aider and abettor the-
ory. Keating again sought habeas relief in the district court.


On February 3, 1998, just before the hearing on Keating's
federal habeas conviction, the California Department of Cor-
rections notified him that it expected that mandate of the court
of appeals to issue on February 5, and ordered him to surren-
der to state prison authorities on February 6 to finish serving
his sentence.


In an expedited hearing on February 5, the district court
granted Keating's petition on the ground that the omission of
the mens rea element from the direct perpetrator instruction
violated due process. The court rejected the State's contention
that it lacked jurisdiction because Keating was not in prison,
the court of appeals' mandate had not issued, and the district
court's original decision granting his habeas petition remained
in effect. The court reasoned that it had jurisdiction because
the State's expressed intention to reincarcerate Keating was a
significant restraint on his liberty.


On the merits, the district court rejected the State's conten-
tion that the absence of any evidence to support the direct per-
petrator theory made it clear that the jury convicted Keating
on an aider and abettor theory and rendered the instructional
error harmless. As the basis for prejudice, the court cited the
prosecutor's "direct perpetrator" arguments to the trial court
and to the jury.


The court of appeals issued its mandate on February 5,
1998; the next day, the district court filed its written order
granting Keating's habeas petition. The State appealed.


[1] Keating's first petition was not actually dismissed until
February 11, after the court of appeals' mandate had issued.
Before February 11, Keating had filed a new petition omitting
the unexhausted claim. The new petition simply restated
Keating's primary claim and dropped the secondary one. The


                               12694


district court treated his filing as a second petition; however,
because the first petition had not yet been dismissed, and
because the grounds in it were identical to those stated in the
1995 petition, the new petition was more properly regarded as
an amended petition deleting the unexhausted claim.


[2] Instructions that allow a jury to convict without finding
every element of the offense violate the requirement that
every fact necessary to constitute the crime must be proven
beyond a reasonable doubt. Omission of the mens rea element
from the jury instructions violated Keating's right to due pro-
cess by allowing the jury to convict him without finding a
requisite element of the offense.


[3] Harmless error analysis is required even when an ele-
ment of the offense has been entirely removed from the jury's
consideration. The Supreme Court has held that a reviewing
habeas court must determine from the record whether an error
is harmless, and that where great doubt exists, must hold the
error prejudicial.


[4] When a jury delivers a general verdict that may rest
either on a legally valid or legally invalid ground, the verdict
may not stand when there is no way to determine its basis.
When two theories are presented to a jury and one is factually
insufficient, a conviction may be upheld because a jury is
equipped to analyze the evidence, and a court can assume that
it rested its verdict on the ground that the facts supported.
However, since jurors are generally not equipped to determine
whether a particular theory of conviction submitted to them is
contrary to law, a conviction must be overturned if one of the
theories was legally erroneous.


[5] Even when the evidence supporting the legally correct
theory was very strong, and the state did not argue the legally
erroneous theory to the jury, the conviction must be reversed
when it is not possible to determine whether the jury relied on
the erroneous theory to convict the defendant. Instructing the


                               12695


jury on a legally erroneous theory is particularly damaging
when the jurors are not required to agree unanimously on the
theory of conviction; in such cases, the possibility that even
one juror might have relied on the legally erroneous theory
requires invalidation of the conviction. [6] There is a limited
exception to the principle: reversal may not be required if it
is absolutely certain that the jury relied on the legally correct
theory to convict the defendant.


[7] The court of appeals could not say that it was
"absolutely certain" that the jury did not rely on the legally
erroneous direct perpetrator theory to convict Keating. Keat-
ing's jury did not make any finding that rendered it
"impossible" that it convicted him as a direct perpetrator.
Because of the absence of any such finding, and because the
jury was not instructed that it could convict Keating only as
an aider and abettor, the court could not determine with cer-
tainty that the jury rested its verdict on that theory.


[8] The conviction of Keating as a direct perpetrator was
not rendered impossible by the absence of any argument or
evidence presented in support of such a theory. After the close
of evidence, the prosecutor vigorously argued to the judge
that Keating could be held criminally liable as a direct perpe-
trator. Moreover, although the prosecutor did not expressly
ask the jury to convict Keating as a direct perpetrator, the lan-
guage, analogies, and reasoning employed in his closing argu-
ment could readily be interpreted as conveying a theory of
direct perpetrator liability to the jurors: that Keating was the
source of the offers of the bonds to the bond sellers, and was
directly responsible for the omission of material information
from those offers. [9] The court of appeals could not conclude
that the instructional error was harmless.


Judge Rymer concurred in part and dissented in part, con-
cluding that the trial court's failure to instruct the jury on
intent was harmless in light of overwhelming evidence show-
ing Keating's criminal intent.


                               12696

COUNSEL

Sanjay T. Kumar, Deputy Attorney General, Los Angeles,
California, for the respondents-appellants.


Scott D. Devereaux and Stephen C. Neal, Cooley Godward,
Palo Alto, California, for the petitioner-appellee.


Andrew R. McGaan, Kirkland & Ellis, Chicago, Illinois, for
the petitioner-appellee.


_________________________________________________________________

ORDER

The slip opinion ("slip op.") filed September 16, 1999 is
amended as follows:


      1. At slip op. 11726, headnote 3, lines 12-14,
      delete "The burden of demonstrating that the
      error was harmless belongs to the government.
      See O'Neal v. McAninch, 513 U.S. 432, 444-45
      (1995)." Replace with: "The Court has also held
      that a reviewing habeas court must determine
      from the record whether an error is harmless,
      and that where great doubt exists, must hold the
      error prejudicial. See O'Neal v. McAninch, 513
      U.S. 432 (1995)."


In addition, Judge Rymer's partial dissent is also amended by
deleting footnote 5 on pp. 11739-40 of the slip op. Renumber
subsequent footnotes.


_________________________________________________________________

                               12697


OPINION

REINHARDT, Circuit Judge:

Most readers of this opinion will be well acquainted with
the activities of Charles Keating, whose corporations, Ameri-
can Continental Corporation and Lincoln Savings & Loan,
bilked elderly individuals out of millions of dollars of savings
by selling them worthless savings bonds. Keating was prose-
cuted in both federal and state court, and sentenced to sub-
stantial terms of imprisonment, to be served concurrently. He
ultimately spent five years in prison. His federal and state tri-
als were both marred, however, by errors which led our court
to reverse his federal conviction1 and a federal district court
to grant his state habeas petition. Following these actions,
Keating was released from prison prior to the completion of
his prison sentences. At the time, only six months remained
before he would have become eligible for parole on his state
sentence. Keating subsequently pleaded guilty to the federal
charges and, pursuant to a plea agreement, was sentenced to
time served.


We now consider whether the district court's decision
granting Keating habeas relief from his state conviction was
legally correct. The decision was based on the ground that the
jury instruction defining the offense of securities fraud errone-
ously omitted the mens rea element. We affirm the district
court's holding that the omission of this essential element of
the offense violated due process and requires the reversal of
Keating's conviction.
_________________________________________________________________
1 See United States v. Keating, 147 F.3d 895 (9th Cir. 1998) (holding
that jurors' knowledge that Keating had been convicted in state court of
offense arising out of same factual circumstances required reversal of fed-
eral conviction).


                               12698


I.

BACKGROUND

In 1990, Keating was indicted in California state court for
violating sections 25401 and 25540 of the California Corpora-
tions Code, which make it a criminal offense to offer or sell
a security "by means of any written or oral communication
which includes an untrue statement of material fact necessary
in order to make the statements made, in light of the circum-
stances under which they were made, not misleading. " The
state contended, in essence, that the bond sellers were misled
by Keating's failure to inform them of American Continen-
tal's poor financial condition and the riskiness of the bonds,
and that they, in turn, unwittingly misled the bond purchasers.
It is undisputed that in 1989, when American Continental's
financial circumstances had deteriorated to the point where
the company was no longer able to make payments on the
bonds, it filed for bankruptcy and most of the bond purchasers
lost the money they had invested.2


Prior to trial, the judge informed the jury that Keating could
be held criminally responsible either as a direct perpetrator or
for aiding and abetting the offense. Before the parties' closing
arguments, however, a dispute erupted over whether a direct
perpetrator theory of liability would be presented to the jury.
The defense requested a jury instruction that, because Keating
had not personally sold or offered the securities to the pur-
chasers, he could only be convicted as an aider and abettor.
The prosecution objected, informing the court that it planned
to argue both theories to the jury. Keating renewed his protest,
pointing out that he had had no face-to-face contact or direct
communication with the individuals named in the indictment,
_________________________________________________________________
2 We discuss the facts of his alleged state crimes only insofar as they are
relevant to the errors in jury instructions that infected Keating's state trial.
For a more detailed discussion of the conduct underlying the state charges,

see People v. Keating, 19 Cal.Rptr.2d 899 (Cal. Ct. App. 1993).

                               12699


and the trial judge concurred with his skepticism about the
direct perpetrator theory. The prosecutor countered that a
direct perpetrator instruction was "supported in an evidentiary
sense" if Keating was viewed as the original source of the
offer and of the misleading omission of information. The
prosecution characterized Keating "as the alter ego for the
corporation" and stated that in its view "the gravaman of the
offense . . . is not so much an actual sale as it is the omission
or misrepresentation aspect of it." This theory identified Keat-
ing as the source of the failure to notify anyone of the finan-
cial risks of the bonds, a material omission that was ultimately
transmitted to the bond purchasers, and that was "violative of
the statute just as much as an actual sale." As the judge's dis-
comfort with the prosecution's theory of liability became
increasingly clear, the prosecution urged one last possible
way to view Keating as a direct perpetrator:


      [O]ne thing the evidence does demonstrate is that it
      was the defendant who singly was setting the terms
      of the offer, interest rates in the offer, maturity dates
      in the offer and that [American Continental] was
      promulgating various material in the form of track
      records, annual reports and the like that were utilized
      as part of an offer as well for these individuals. And
      I would state in that regard, the bond seller becomes
      a communicator of that; but it is the defendant again
      who is the source of the bond.


The judge was not convinced. While acknowledging that
"both theories are in a technical sense before the jury," he
concluded that the direct perpetrator theory was inconsistent
with both the wording of the indictment, which charged "a
completed sale" rather than an offer, and the statute under
which the prosecution had charged Keating. The defendant
continued to urge the judge to offer the instruction that Keat-
ing could only be convicted as an aider and abettor, arguing
that the need for such an instruction was clearly demonstrated
by the prosecution's insistence that a direct perpetrator theory


                               12700


was supported by the evidence. Realizing that if it did not
back off of its insistence that a direct perpetrator theory was
viable, the judge would give the instruction proposed by the
defense, the prosecution promised to argue the case only
under an aiding and abetting theory.


When the defense attorney later renewed his request for an
instruction limiting the basis on which Keating could be con-
victed, the judge announced, "I had previously declined to so
instruct because I think the evidence is clear that Mr. Keating
never actually had any face-to-face contact with any of the
bond purchasers. So clearly his only liability can be as an
aider and abettor. I think that's already abundantly clear."


After closing arguments, which are discussed in greater
detail later in this opinion, the judge instructed the jury.3
Because the content of the jury instructions is of paramount
importance in this case, they are excerpted here:


       Every person who willfully sells or offers to sell
      a security in this state by means of any written or
      oral communication which includes an untrue state-
      ment of a material fact or omits to state a material
      fact necessary in order to make the statements made,
      in light of the circumstances under which they were
      made, not misleading, is guilty of a violation of sec-
      tions 25401/25540 of the California Corporations
      Code.


       In order to prove such crime, each of the follow-
      ing elements must be proved:


       1. The defendant willfully sold or offered to sell
      a security in the state of California;
_________________________________________________________________
3 After closing arguments, defense counsel renewed his objection to the
trial judge's refusal to give the requested instruction.


                               12701


       2. By means of any written or oral communication
      which includes an untrue statement of material fact
      or omits to state a material fact necessary in order to
      make the statements made, in light of the circum-
      stances under which they were made, not mislead-
      ing.


       . . .

       The term "offer" or "offer to sell" includes every
      attempt or offer to dispose of, or solicitation of an
      offer to buy, a security or an interest in a security for
      value.


       The term "sale" or "sell" includes every contract
      of sale of, contract to sell, or disposition of, a secur-
      ity or interest in a security for value.


       The persons concerned in the commission of a
      crime who are regarded by laws as principals in the
      crime thus committed and equally guilty thereof
      include:


       1. Those who directly and actively commit the act
      constituting the crime, or;


       2. Those who aid and abet the commission of the
      crime.


Trial Transcript at 7468-70.

The jury was then instructed that, in order to convict Keat-
ing under the aiding and abetting theory, it would have to find
that he knew that the bond sellers were making untrue state-
ments or omitting material facts and that he intended to facili-


                               12702


tate, encourage or promote these untrue statements or
omissions.4


Two key facts are apparent from a reading of the instruc-
tions. First, the instructions did not limit the jury to an aiding
and abetting theory, but outlined two possible bases for Keat-
ing's criminal liability and allowed the jury to convict him on
either theory it deemed proven. Second, the instructions
allowed the jury to convict Keating as a direct perpetrator
without finding that he had any knowledge of the falsity of
the information that he conveyed or that he was negligent or
reckless for failing to know; in other words, with respect to
the direct perpetrator theory, the instructions contained no
mens rea requirement. This was consistent with the interpreta-
tion that the California Court of Appeals had given the law at
the time. See People v. Baumgart, 267 Cal.Rptr. 534, 540-41,
218 Cal.App.3d 1207, 1219-20 (Cal. Ct. App. 1990) (conclud-
ing that SS 25401 and 25540 required no criminal intent);
People v. Johnson, 262 Cal.Rptr. 366, 369, 213 Cal.App.3d
1369, 1375 (Cal. Ct. App. 1989) (same).
_________________________________________________________________

4 The instruction on aiding and abetting required that the jury find the
following:


       1. An untrue statement of material fact or omission of a mate-
      rial fact was made by bond sellers in connection with the sale of
      bonds to the bond buyers identified in counts II through XVIII
      and XX, inclusive, of the indictment, and;


       2. The defendant had knowledge that the bond sellers were
      making an untrue statement of material fact or omitting a material
      fact in the sales involved in each count, and;


       3. The defendant intended to aid, encourage or facilitate the
      bond sellers in making an untrue statement of material fact or
      omitting a material fact in the sales involved in each count, and;


       4. The defendant, by act or advice, intentionally aided, pro-
      moted, encouraged or instigated the making of the untrue state-
      ments of material facts or the omission of material facts.


Trial Transcript at 7470-71.

                               12703


The jury returned a verdict convicting Keating of seventeen
of the eighteen charged counts of sales of securities by means
of false statements or omissions. This general verdict did not
specify whether the jury convicted Keating as a direct perpe-
trator or as an aider and abettor.


Keating appealed, and his conviction was affirmed by the
California Court of Appeals. The court rejected Keating's
argument that the trial judge had erred by instructing the jury
on a direct perpetrator theory for which there was insufficient
evidence. It acknowledged that the "[t]he trial court presented
the case to the jury with instructions that conviction was pos-
sible under theories that Keating was either the direct seller or
a principal who was aiding and abetting the violation," but
reasoned that "[a] reading of these instructions indicates to
this court, as it must have to the jurors, that Keating was being
tried on the theory that he aided and abetted in the sales of the
`junk bonds.' " People v. Keating, 19 Cal.Rptr.2d at 916, 920.
The court also denied Keating's claim regarding the failure to
give the instruction limiting the jury's considerations to the
aider and abettor theory, reasoning, "[c]learly, Keating never
personally sold any security to any of the individual investors
. . . . It is inconceivable that there was any need to give this

instruction. To have given this instruction would be stating
the obvious." Id. at 920. Finally, the court rejected Keating's
argument that the omission of the mens rea element was an
error, relying on previous decisions by the California Court of
Appeals defining SS 25401 and 25540 as establishing a strict
liability offense. See Keating, 19 Cal.Rptr.2d at 917-18.


The California Supreme Court initially granted Keating's
petition for review. See People v. Keating, 859 P.2d 673 (Cal.
1993). Before it decided his case, however, it decided People
v. Simon, 886 P.2d 1271 (1995), in which it held that
"knowledge of the falsity or misleading nature of a statement
or of the materiality of an omission, or criminal negligence in
failing to investigate and discover them" is  required to convict
a defendant of violating SS 25401 and 25540, overruling the


                               12704


Court of Appeals decisions that held otherwise. Simon, 886
P.2d at 1281, 1290. Then, rather than proceeding with its
review of the Court of Appeals' rejection of Keating's appeal
(a decision based on two cases that the Supreme Court had
now disavowed), the Supreme Court dismissed Keating's
petition without review as improvidently granted. See People
v. Keating, 890 P.2d 1119 (Cal. 1995).


A few months after the California Supreme Court dis-
missed his petition, Keating filed a petition for habeas relief
in federal district court. The court granted his petition based
on two grounds: that the failure to include a mens rea require-
ment in the direct perpetrator instruction eliminated an essen-
tial element of the offense from the jury's consideration and
therefore violated due process, and that the omission of this
element also infected Keating's conviction by allowing the
jury to convict him as an aider and abettor without finding
that the direct perpetrator had the requisite criminal intent.
Keating v. Hood, 922 F. Supp. 1482, 1486-88, 1492-94 (C.D.
Cal. 1996).5 The state appealed this decision, and on January
15, 1998 this Court dismissed Keating's petition without prej-
udice because of his failure to exhaust his secondary claim,
that the absence of a mens rea element in the direct perpetra-
tor instruction had also infected any conviction on the aiding
and abetting theory. Keating v. Hood, 133 F.3d 1240, 1241-42

(9th Cir. 1998).

Rather than filing a petition for rehearing in this court or
pursuing the secondary claim in state court, Keating decided
to waive that claim. Accordingly, on January 22, 1998, he
again filed the same habeas petition in the district court, this
time omitting the secondary claim. On February 3, 1998,
shortly before the hearing that the district court had scheduled
_________________________________________________________________
5 Keating was not immediately released because he was still serving time
for his federal conviction. Based on the progress of his direct appeal of
that conviction, he was released on federal bond six months later, on Octo-
ber 3, 1996.


                               12705


to discuss the new petition, the State Department of Correc-
tions sent Keating a letter informing him that it expected the
mandate of this Court to issue on February 5 and ordering him
to surrender to state prison authorities at 3:00 p.m. on Febru-
ary 6 in order to finish serving his sentence.


The district court held an expedited hearing on February 5,
at which time it verbally granted Keating's habeas petition on
the ground that the omission of the mens rea element from the
direct perpetrator instruction violated due process. In doing
so, the court first rejected the state's challenge to its jurisdic-
tion over the petition. At the time he filed the new petition,
Keating was no longer in prison, and our mandate had not yet
issued on the decision which dismissed his appeal and rein-
stated his conviction; thus, the state argued, the district court's
decision granting his habeas petition remained in effect, and
he could not be considered "in custody" for jurisdictional pur-
poses. To address the state's concerns, the court offered to
delay the habeas proceeding as long as the state would prom-
ise that Keating would remain free from state custody until
the district court could rule on his petition. However, the state
was unwilling to make such a commitment. The court then
decided that it had jurisdiction to consider Keating's petition,

analogizing his position to that of a defendant who is released
on his own recognizance pending appeal, and holding that the
state's announcement of its plans to reincarcerate him sub-
jected him to "a significant restraint upon his liberty."


In reaching its decision on the merits of the petition, the
court rejected the state's argument that the absence of any evi-
dence to support the direct perpetrator theory made it clear
that the jury had convicted Keating as an aider and abettor
and thus rendered the instructional error harmless. The court
relied on the facts that the prosecutor had argued to the trial
judge that there was sufficient evidence to justify a direct per-
petrator instruction, and that in his closing argument to the
jury the prosecutor had employed language, analogies and
reasoning that suggested direct perpetrator liability.


                               12706


Our mandate issued on February 5, 1998, and the next day
the district court filed its written order granting Keating's
habeas petition.6 The state has appealed the district court's
ruling, objecting both on jurisdictional grounds and on the
merits.


II.

JURISDICTION

[1] The state raises a jurisdictional challenge, arguing that
Keating was not "in custody" at the time that he filed his new
habeas petition because he had been freed on the first petition
and the mandate had not yet issued on this Court's decision
dismissing that petition for failure to exhaust state remedies.
Thus, the state reasons, we do not have jurisdiction over the
new petition. The sequence of events causes us to reach a dif-
ferent conclusion. Keating's first petition was not actually dis-
missed until February 11, after our mandate had issued. Well
before February 11, Keating had filed a new petition omitting
the unexhausted claim. The new petition simply restated
Keating's primary claim and dropped the secondary one. The
district court treated his filing as a second petition; however,
because the first petition had not yet been dismissed, and
because, as the district court stated, "[t]he grounds [in the
instant petition] are identical to those stated in the 1995
petition," the new petition would more properly be regarded

as an amended petition deleting the unexhausted claim. See
Rose v. Lundy, 455 U.S. 509, 510 (1982) (when habeas peti-
_________________________________________________________________
6 The decision to grant the habeas petition actually became effective on
February 11, the date that the written order granting Keating's petition was
entered on the docket. See Fed. R. Civ. Pr. 79(a) ("A judgment is effective
only when so set forth and when entered as provided in Rule 79(a)."); 46
AM. JUR. 2D JUDGMENTS S 135 (1994) ("Entry of judgment occurs only
when (1) the essentials of the judgment or order are set forth in a written
document separate from the court's opinion or memorandum and (2) when
the substance of the separate document is reflected in an appropriate nota-
tion on the docket sheet.").


                               12707


tion has been dismissed for failure to exhaust, petitioner has
"the choice of returning to state court to exhaust his claims or
of amending or resubmitting the habeas petition to present
only exhausted claims to the district court."); Calderon v.
U.S.D.C. ("Thomas"), 144 F.3d 618, 620 (9th Cir. 1998) (dis-
cussing district court's power to allow amendment of habeas
petition to strike unexhausted claims); Calderon v. U.S.D.C.
("Taylor"), 134 F.3d 981 (9th Cir. 1998) ("The Supreme
Court in Rose specifically provided habeas petitioners with
the option of amending their applications to delete unex-
hausted claims rather than suffering a dismissal"); Guizar v.
Estelle, 843 F.2d 371, 372 (9th Cir. 1998) (under Rose v.
Lundy, petitioners "should have the option of either resubmit-
ting their petitions with only exhausted claims, or exhausting
the remainder of their claims in state court and then filing new
petitions . . . . [If petitioner] resubmit[s] his petition with only
the exhausted claims, . . . the district court may accept it nunc

pro tunc and reinstate its opinion.").7  We now hold that the
instant petition may be treated as an amendment or resubmit-
tal of Keating's first habeas petition, and instruct the district
court to deem it as having been so filed, nunc pro tunc, under
case number CV 95-5151 JGD.8 See Calderon v. U.S.D.C.
_________________________________________________________________
7 The fact that Keating labelled the petition a second petition rather than
an amended petition is not dispositive. It is often necessary to look beyond
the labels that a party selects. See Thompson v. Calderon, 151 F.3d 918,
920 (9th Cir. 1998) (en banc) (petitioner's motion for relief from judgment
under Federal Rule of Civil Procedure 60(b) must be construed as succes-
sive habeas petition); National Org. for Reform of Marijuana Laws v.
Mullen, 828 F.2d 536, 541 (9th Cir. 1987) (court has discretion to treat
appeal as petition for writ of mandamus).
8 Because of the manner in which we resolve the jurisdictional issue, we
need not determine whether the district court was correct in concluding

that Keating was in custody when the January 22nd petition was filed. We
simply note that he makes a strong argument that he was. Only the slim
possibility of a sua sponte request for en banc rehearing stood between
Keating and reimprisonment. See Hensley v. Municipal Court, 411 U.S.
345, 351-52 (1973) (petitioner released on recognizance pending execu-
tion of sentence is in custody because "subject to restraints not shared by


                               12708


("Kelly"), 163 F.3d 530, 540 (9th Cir. 1998) (en banc), cert.
denied, 119 S.Ct. 1377 (1999) (noting that district court could
exercise nunc pro tunc power to deem recently filed habeas
petitions to have been filed as of the filing date of two earlier
petitions that were erroneously dismissed); Miller v. Laird,
464 F.2d 533, 534-35 (9th Cir. 1972) (filing of amended peti-
tion relates back to date of original petition for purposes of in
custody requirement).9 Because Keating's first petition was
filed before the effective date of the Antiterrorism and Effec-
tive Death Penalty Act, the provisions of the AEDPA do not
govern resolution of this case. See Lindh v. Murphy, 521 U.S.
320, 327 (1997) (AEDPA does not apply to petitions pending
on date of enactment).10
_________________________________________________________________
the public generally" and faces imminent threat of incarceration) (internal
quotation marks and citation omitted); Vargas v. Swan, 854 F.2d 1028,
1030-31 (7th Cir. 1988) (unlikely possibility that INS would decline to

take custody of petitioner under detainer warrant does not deprive court
of jurisdiction). Moreover, Keating was unquestionably in custody with
respect to his federal conviction, under a federal bond and subject to
restraints on his freedom of movement. A habeas petitioner who is in cus-
tody under one conviction may use the writ to challenge a future sentence.
See Estelle v. Dorrough, 420 U.S. 534 (1975).
9 Henry v. Lungren, 164 F.3d 1240, 1241 (9th Cir. 1999), is not to the
contrary. In that case, after the district court dismissed his first habeas
petition and failed to retain jurisdiction over it, the petitioner refiled in
state court in order to exhaust his claims. Accordingly, unlike in this case,
the dismissal took effect and, following termination of the state court pro-
ceeding, the petitioner was required to file a second petition.
10 We find Judge Rymer's disapproval of our holding on the jurisdic-
tional question odd in view of her "pragmatic " attitude toward the filing
of premature habeas petitions and appeals. With regard to the "flip side"

(appeals) Judge Rymer concludes we permit premature filings because
requiring refiling would be "silly." Although the rule is not as simple as
that, we are willing to accept her view that Keating's habeas petition
should be treated as prematurely filed and that it became "ripe" when our
mandate issued. We adopt her position as an alternate holding on the juris-
dictional question.


                               12709


III.

DUE PROCESS

It is not disputed that the omission of the mens rea element
from the direct perpetrator instruction was erroneous under
People v. Simon, 886 P.2d 1271 (Cal. 1995). At issue is
whether this error in instructing the jury constituted a viola-
tion of federal due process compelling the grant of habeas
relief.


[2] Instructions that allow a jury to convict without finding
every element of the offense violate In re Winship's require-
ment that "every fact necessary to constitute the crime" must
be proven beyond a reasonable doubt. In re Winship, 397 U.S.
358, 364 (1970). Due process "require[s] criminal convictions
to rest upon a jury determination that the defendant is guilty
of every element of the crime with which he is charged,
beyond a reasonable doubt." United States v. Gaudin, 515
U.S. 506, 510 (1995). Therefore, an instruction that relieves
the state of the burden of proving mens rea beyond a reason-
able doubt contradicts the presumption of innocence and
invades the function of the jury, thereby violating due pro-
cess. See Sandstrom v. Montana, 442 U.S. 510, 521-24
(1979). As the Seventh Circuit noted, "every federal court to
consider the question since the Court decided In re Winship
. . . has agreed that a conviction procured without any jury
instruction on an essential element of the offense is constitu-

tionally invalid." Cole v. Young, 817 F.2d 412, 424 (7th Cir.
1987). See also Osborne v. Ohio, 495 U.S. 103, 122-24 &
n.17 (1990) (omission of element from jury instructions vio-
lates due process); United States v. Mendoza, 11 F.3d 126,
128 (9th Cir. 1993) ("[W]hen a trial judge omits an element
of the offense charged from jury instructions, it deprives the
jury of its fact-finding duty and violates the defendant's due
process rights"). It is therefore clear that the omission of the
mens rea element from the instructions to the jury violated


                               12710


Keating's right to due process by allowing the jury to convict
him without finding a requisite element of the offense.11


IV.

HARMLESS ERROR ANALYSIS

[3] The Supreme Court has recently made it clear that
harmless error analysis is required even when an element of
an offense has been entirely removed from the jury's consid-
eration. See Neder v. United States, No. 97-1985, _______ S. Ct.
_______, 1999 WL 373186 (June 10, 1999). The Court has also
held that a reviewing habeas court must determine from the
record whether an error is harmless, and that where great
doubt exists, must hold the error prejudicial. See O'Neal v.
McAninch, 513 U.S. 432 (1995).


The state argues that the omission of the mens rea element
from the jury instruction was harmless, but only on a very
specific ground. The state does not argue that even if the jury
convicted Keating as a direct perpetrator the instructional
error was harmless because "the omitted element was uncon-
tested and supported by overwhelming evidence, such that the
jury verdict would have been the same absent the error."
Neder, supra. Nor does it contend that a review of the record
would establish, under the applicable harmless error standard,
_________________________________________________________________
11 We reject the state's argument that granting habeas relief to Keating
would violate Teague's prohibition of reliance on rules adopted after a
defendant's conviction has become final. See Teague v. Lane, 489 U.S.
288 (1989). It has long been clear that omission of an element of the
offense from the jury instructions violates due process. The state's argu-
ment rests on an erroneous interpretation of Teague -- an interpretation

that would preclude relief to any habeas petitioner unless the Supreme
Court had decided a case involving identical facts, circumstances, and
legal issues. Contrary to the state's contention, it is not necessary that the
Court have issued a decision that the failure to instruct on the particular
element involved violates due process. For purposes of Teague, the
Court's declaration of the general rule regarding a failure to instruct on an
element of the offense is sufficient.


                               12711


that the jury would have found that Keating had the mens rea
required under the statute, rendering any due process violation
harmless. Instead, the state contends that the error was harm-
less because the jury convicted Keating as an aider and abet-
tor rather than as a direct perpetrator, and thus did not rely on
the legally erroneous theory. At oral argument, counsel for
Keating stated on several occasions that the state had con-
ceded that the error was not harmless if Keating was con-
victed as a direct perpetrator, and the state did not contest this
statement. Thus, there can be no question that the state's deci-
sion not to assert that the error was harmless if the conviction
was based on the direct perpetrator theory was knowing and
deliberate.


[4] The fundamental rule that applies when a jury delivers
a general verdict that may rest either on a legally valid or
legally invalid ground is clear: the verdict may not stand when
there is no way to determine its basis. "It has long been settled
that when a case is submitted to the jury on alternative theo-
ries the unconstitutionality of any of the theories requires that
the conviction be set aside." Sandstrom, 442 U.S. at 526. See
also Yates v. United States, 354 U.S. 298, 312 (1957),
overruled on other grounds, Burks v. United States, 437 U.S.
1 (1978) ("[T]he proper rule to be applied is that which
requires a verdict to be set aside in cases where the verdict is
supportable on one ground, but not on another, and it is
impossible to tell which ground the jury selected"); Stromberg
v. California, 283 U.S. 359, 368 (1931) ("[I]f any of the
clauses in question is invalid under the Federal Constitution,
the conviction cannot be upheld"). When two theories are
presented to a jury and one is factually insufficient, a convic-

tion may be upheld, because a jury is "equipped to analyze the
evidence" and so a court may assume that it rested its verdict
on the ground that the facts supported. Griffin v. United
States, 502 U.S. 46, 59 (1991). However, since"[j]urors are
not generally equipped to determine whether a particular the-
ory of conviction submitted to them is contrary to law," a con-


                               12712


viction must be overturned if one of the theories that was
submitted to the jury was legally erroneous. Id.


[5] We have consistently interpreted Supreme Court prece-
dent to require reversal in any case in which a verdict may
have rested on a legally invalid ground. See United States v.
Qualls, 140 F.3d 824, 829 (9th Cir.), vacated on other
grounds, 119 S.Ct. 398 (1998) ("[T]he Supreme Court has
determined that a verdict must be set aside in cases such as
this where the verdict is legally insupportable on one ground,
yet supportable on another, and it is impossible to tell on
which ground the jury relied."); United States v. Fulbright,
105 F.3d 443, 451 (9th Cir.), cert. denied, 117 S.Ct. 1836
(1997) ("[T]he jury instructions permitted the jury to choose
a basis for conviction that was legally impermissible . . . .
Because we have no way to ascertain the factual basis on
which the jury convicted Fullbright, his conviction under
Count II cannot stand."); United States v. Barona, 56 F.3d
1087, 1098 (9th Cir. 1995) ("Where the jury is presented with
a legally inadequate theory, as opposed to a factually inade-
quate theory, Yates requires that the conviction be vacated").

We have applied the same reasoning in habeas cases, holding
that, even when the evidence supporting the legally correct
theory was "very strong" and the state did not argue the
legally erroneous theory to the jury, the conviction must be
reversed when it is not possible to determine whether the jury
relied upon the erroneous theory to convict the defendant. See
Suniga v. Bunnell, 998 F.2d 664, 667, 669-70 (9th Cir. 1993).
We have noted that instructing the jury on a legally erroneous
theory in a case in which it is also instructed on a legally cor-
rect theory is particularly damaging when the jurors are not
required to agree unanimously on the theory of conviction; in
such cases, the possibility that even one juror might have
relied upon the legally erroneous theory requires invalidation
of the conviction. See id. at 669.


[6] There is a limited exception to the principle: reversal
may not be required if "it is absolutely certain" that the jury


                               12713


relied upon the legally correct theory to convict the defendant.
Ficklin v. Hatcher, No. 98-15025, slip op. at 5001 (9th Cir.
May 25, 1999) (emphasis in original). In Ficklin , the jury had
been erroneously instructed that it could convict a defendant
of murder under an implied malice theory if it found that the
murder was committed as part of a robbery attempt. 12 How-
ever, the jury had also been correctly instructed that it could
convict the defendant of first degree murder only if it found
that the defendant had committed a "wilful, deliberate and
premeditated killing." Id. at 4995. The defendant was con-
victed of first degree murder. Ficklin  held that the jury's
guilty verdict on the first degree murder charge demonstrated
that the implied malice theory "could not have played a part
in the jury's determination." Id. at 5000. However, the court
explained that affirmance of a conviction when the jury was
instructed on a legally erroneous theory was permissible only
in "situations in which this Court determines that it was

impossible for the jury to have relied on the infirm
instruction," and that its decision did "not suggest that a gen-
eral verdict can be sustained if there is `ample' evidence pres-
ented on a constitutional theory or if the prosecution `relied
primarily' on a constitutional theory." Id.  at 5002, 5001
(emphasis in original).


[7] We cannot say that it is "absolutely certain" that the
jury did not rely on the legally erroneous direct perpetrator
theory to convict Keating. Unlike in Ficklin, Keating's jury
did not make any finding that renders it "impossible" that it
convicted him as a direct perpetrator. Because of the absence
of any such finding, and because the jury was not instructed
that it could convict Keating only as an aider and abettor, we
cannot determine with certainty that the jury rested its verdict
on that theory.13
_________________________________________________________________
12 The instruction was erroneous under the double jeopardy clause; the
defendant had already pled guilty in juvenile court to the robbery offense.
Slip op. at 4994, 4997 n.2.
13 Moreover, the fact that the jury did not have to find that Keating knew
that the information that he conveyed to the bond sellers was false in order


                               12714


[8] We reject the state's argument that the conviction of
Keating as a direct perpetrator was rendered impossible by the
absence of any argument or evidence presented in support of
such a theory.14 This argument is contradicted by the prosecu-
tor's own statements at trial. After the close of the evidence,
the prosecutor vigorously argued to the judge that Keating
could be held criminally liable as a direct perpetrator.15 More-
_________________________________________________________________
to convict him as a direct perpetrator, but did have to find criminal intent
in order to convict him as an aider and abettor, would provide a plausible
reason that some jurors might rely on the direct perpetrator instruction as
a basis for conviction even if the other ground appears to be the more logi-
cal basis for liability.
14 The state also argues that the California Court of Appeals made a fac-
tual finding that Keating had been convicted as an aider and abettor rather
than as a direct perpetrator, and that this finding must be afforded defer-

ence. However, the state court's conclusion that it was "obvious" that
Keating could not be convicted as a direct perpetrator because he "was
being tried on the theory that he aided and abetted in the sale of `junk
bonds," was not a finding of fact, but rather a determination that any error
in instructing the jury on a direct perpetrator theory without giving Keat-
ing's requested instruction was harmless. We do not defer to a state
court's conclusion that a constitutional error was harmless, but instead
review this question de novo. See Lawson v. Borg , 60 F.3d 608, 612 (9th
Cir. 1995); Dickson v. Sullivan, 849 F.2d 403, 405 (9th Cir. 1988). Addi-
tionally, because the state court discussed the theory on which the jury
relied in the context of rejecting Keating's argument that there was insuffi-
cient evidence to justify a direct perpetrator instruction, its conclusion was
dicta. See People v. Guiton, 847 P.2d 45, 50-53 (Cal. 1993) (finding that
one basis for a conviction is factually insufficient does not require reversal

as long as there is a factually sufficient basis for the jury's verdict).
15 Although the judge responded by expressing his disagreement with
the prosecutor's theory, he did not communicate this disagreement to the
jury, and in fact instructed it that an "offer to sell" could include "every
attempt to, or offer to dispose of . . . a security " -- an instruction that the
prosecutor himself had interpreted as allowing Keating's conviction as the
source of the offer. In the proposed jury instructions that it submitted prior
to trial, the state had relied on this definition to argue that no "linkage or
connection" need be shown "between a defendant`offerer' and a victim
buyer," and argued that "the People are not obligated to prove direct and
personal contact between each defendant and every victim." People's Pro-
posed Liability Theory Jury Instructions at 26, 28.


                               12715


over, although the prosecutor did not expressly ask the jury to
convict Keating as a direct perpetrator, the language, analo-
gies, and reasoning employed in his closing argument can
readily be interpreted as conveying a theory of direct perpe-
trator liability to the jurors: that Keating was the source of the
offers to the bond sellers and was directly responsible for the
omission of material information from these offers. 16


[9] For the reasons set forth above, we cannot conclude that
the instructional error was harmless.17
_________________________________________________________________
16 In fact, the district court concluded that "[a] reasonable reading of the
prosecutor's closing argument makes the conclusion that he considered the
aiding and abetting theory subsidiary to the direct perpetrator theory
nearly inescapable." Dist. Ct. Opinion at 25. In his closing argument, the
prosecutor characterized Keating as responsible for every act of American
Continental (stating that "Mr. Keating was the company"), utilized lan-
guage that described Keating as "selling" the bonds, and employed analo-
gies (of a drive-by shooter and a used car salesman) that were more
suggestive of a direct perpetrator than an aider and abettor. The prosecutor
emphasized that Keating was the source of the material omissions of infor-
mation by comparing the flow of information at Lincoln and American
Continental to an "hourglass," explaining that Keating "controlled the

flow of information downstream" through his "conduit" (a bank official
who had more direct contact with the bond sellers) in a manner that caused
the bond sellers to be unaware of the information suggesting that the
bonds were a risky investment. In his opening argument, the prosecutor
had similarly emphasized Keating's direct responsibility for the material
omissions and thereby suggested that he had acted as a direct perpetrator.
17 Even were we to review the record for the purpose of determining
whether, if Keating was convicted as a direct perpetrator, the omission of
the mens rea element would be harmless, we would reach the same result.
Although it is not readily apparent how to resolve the tension between the
California v. Roy, 519 U.S. 2 (1996), and the Stromberg line of cases,
under any of the possible approaches, the result would be the same. Under
Roy, the most stringent approach, we would look first to the erroneous
instruction regarding the direct perpetrator theory of liability, and deter-
mine whether a verdict of guilty under it would be harmless error. Unlike

Neder, in which the defendant failed to contest the omitted element, here
Keating vigorously challenged the state's evidence that pointed to his
knowledge of the falsity or misleading nature of the information that was
conveyed to the bond purchasers. Indeed, those attacks constituted Keat-
ing's entire defense.


                               12716


IV.

CONCLUSION

Because the jury may have convicted Keating as a direct
perpetrator, the omission of an essential element of the
offense from the jury instructions violated due process and
requires a grant of habeas relief. Accordingly, we AFFIRM
the district court's grant of such relief. The mandate will be
held pending a limited remand to permit the district court to
enter the nunc pro tunc order described in this opinion.


AFFIRMED.

_________________________________________________________________

RYMER, Circuit Judge, concurring in part and dissenting in
part:


I concur in the judgment on parts I and II of the majority
opinion, although as I explain below would hold we have
jurisdiction over Keating's S 2254 petition for different rea-
sons. I dissent from the due process/harmless error analysis
_________________________________________________________________
While the evidence that was presented on that question would have
been sufficient to support a conviction, the jury could also reasonably have
concluded that a finding that Keating had the requisite criminal intent
would require it to take too many inferential steps. We would therefore be
left in "grave doubt" whether the jury would have convicted Keating as
a direct perpetrator if required to find criminal intent. When "the matter
is so evenly balanced that [a judge] finds himself in virtual equipoise as
to the harmlessness of the error," and the court is therefore left with a
"grave doubt about the likely effect of an error on the jury's verdict," the
error must be treated as if it were not harmless. O'Neal, 513 U.S. at 435.

That, in our view, is the circumstance in which we find ourselves. We note
that because the state did not raise the Roy question on appeal, a more
extensive analysis of the facts and the law relevant to that question is not
required.


                               12717


the majority employs in parts III and IV, and would instead
reverse the district court's decision to grant the petition.


I

A

In my view the majority's jurisdictional gymnastics are nei-
ther necessary nor appropriate. Instead of treating Keating's
instant habeas petition as an amendment or resubmittal of his
first petition, and instructing the district court to deem it as
having been so filed (apparently as of the date the original
petition was filed), I would simply say that the petition was
filed prematurely (i.e., before our mandate issued), but since
nothing substantive happened in the meantime, once the man-
date did issue Keating was then "in custody" and his habeas
action became ripe. No one suggests that Keating would not
have been "in custody" (literally) on February 6, and Hensley
v. Municipal Court, 411 U.S. 345, 352 (1973) provides
authority for this approach. In Hensley, the Court held that a
convicted state petitioner released on his own recognizance
pending appeal was "in custody" for purposes of habeas juris-
diction. In addition to the fact that Hensley was subject to
statutory restrictions and was at large only by virtue of stays,

the Court noted that its

      conclusion that the petitioner is presently in custody
      does not interfere with any significant interest of the
      State. Indeed, even if we were to accept respondent's
      argument that petitioner is not in custody, that result
      would do no more than postpone this habeas corpus
      action until petitioner had begun service of his sen-
      tence. It would still remain open to the District Court
      to order petitioner's release pending consideration of
      his habeas corpus claim. Even if petitioner remained
      in jail only long enough to have his petition filed in
      the District Court, his release by order of the District
      Court would not jeopardize his "custody" for pur-


                               12718


      poses of a habeas corpus action. Plainly, we would
      badly serve the purposes and the history of the writ
      to hold that under these circumstances the petition-
      er's failure to spend even 10 minutes in jail is
      enough to deprive the District Court of power to hear
      his constitutional claim.


Hensley, 411 U.S. at 352-53 (internal footnote and citations
omitted).


This approach is also consistent with how we handle the
flip side, when notices of appeal are filed after a decision in
the district court but before judgment is entered. In that cir-
cumstance we simply take the pragmatic view that dismissing
for lack of jurisdiction and forcing the appellant to refile at
the appropriate time is silly; the triggering event will have
passed and nothing of moment will have occurred in the
interim. See Fed.R.App.P. 4(a)(2). Put differently, the court to
which the matter is going lacks jurisdiction when the filing is
made because the filing is premature, but has jurisdiction by
the time it matters. The premature filing is treated as having
been made at the time jurisdiction actually attaches. Here, the
situation is quite similar. Even if the State is correct that Keat-
ing was not "in custody" on January 22, 1998, there is no dis-
pute that he would have been taken into custody and would
have begun to complete serving his sentence on February 6
(following issuance of this court's mandate on February 5).1

To hold that he was not in custody on January 22 and to dis-
miss for lack of jurisdiction for that reason "would do no
more than postpone this habeas corpus action until petitioner
had begun service of his sentence." See Hensley, 411 U.S. at
352. In this case, that would have been for no more than fif-
teen days. Nothing happened in the district court, except a
hearing date (after the mandate was expected to issue) was
_________________________________________________________________
1 As the Department of Corrections's February 3, 1998 letter directs,
Keating was to self-surrender at Wasco State Prison at 3:00 p.m. on Febru-
ary 6, 1998.


                               12719


set. For this reason it makes sense to hold that whether or not
the district court had jurisdiction on January 22, Keating's
January 22 filing--although premature--became effective as
of the time this court's mandate issued returning him to cus-
tody because no one questions that the court had jurisdiction
as of February 5.


B

The majority's answer to the jurisdictional question is trou-
bling for a number of reasons. First, Keating never asked the
district court to construe his second habeas petition as an
amendment to his first petition, nor did he try to "resubmit"
his first petition without the unexhausted claim. Rather, he
deliberately filed his second petition as a separate action
under a separate case number. He never argued in district
court or here that he should somehow be relieved in this
respect.


Second, the bottom line of this court's order with respect
to Keating's first habeas petition was "DISMISSED WITH-
OUT PREJUDICE." See Keating v. Hood ("Keating I"), 133
F.3d 1240, 1242 (9th Cir. 1998). As we explained in Henry
v. Lungren, 164 F.3d 1240, 1241 (9th Cir. 1999), dismissal of
an original petition for failure to exhaust state remedies, with-
out retaining jurisdiction, terminates the litigation. This means
that once this court's mandate issued in Keating I, there was
no petition to be "amended" or "resubmitted." Contrast, for
example, this court's order in Reutter v. Crandel, 109 F.3d
575, 578 (9th Cir. 1997), where we also held that the petition
was mixed and required dismissal but expressly stated:
"Reutter may strike the unexhausted claim and resubmit his
petition to the district court." This court's order in Keating I
provides no such option. Thus, on January 22 when Keating's
second habeas petition was filed, the district court no longer
had jurisdiction to do anything with respect to his first petition

since it was still on appeal; even if it had been asked to do so,
it could not have construed the second petition as an amend-


                               12720


ment or resubmittal because it couldn't do anything with
respect to the first petition on January 22. It got jurisdiction
back when our mandate issued on February 5, but at that time
the first petition no longer existed because our dismissal
expressly terminated that litigation. Thus, the district court
could not have construed the second petition as an amend-
ment or resubmittal of the first petition (on either January 22
or February 6) because there was no first petition to amend or
resubmit. And there still isn't.


Regardless, I do not see how we can now direct  the district
court to amend Keating's first petition because (even if it
were still alive) the State had filed a responsive pleading to
the first petition. Therefore Keating himself could not have
amended his first petition or resubmitted an amended petition
without leave of court under Fed.R.Civ.P. 15(a). That, of
course, is a discretionary decision. Keating's case is therefore
doubly distinguished from Calderon v. United States Dist. Ct.
("Thomas"), 144 F.3d 618 (9th Cir. 1998), and Calderon v.
United States Dist. Ct. ("Taylor"), 134 F.3d 981 (9th Cir.
1998), upon which the proposed opinion relies, see ante at
12708, for in both Taylor, 134 F.3d at 986, and (presumably)
Thomas, 144 F.3d at 620, the petitioner sought leave to amend
his original petition to delete an unexhausted claim and the
State had not yet filed a responsive pleading when the peti-
tioner did so.


In any event, Henry precludes determining whether Keating
is "in custody" by reference to the date when he filed his first
petition. Like Keating, Henry filed his original petition when
he was clearly in custody and like Keating I, the original peti-
tion was dismissed without prejudice for failure to exhaust.
Henry filed his second petition after his release from prison
and discharge from parole, but he argued that he was in actual
custody on the theory that the date he filed the earlier habeas
was the operative date--not the date he filed the present peti-
tion. We disagreed, noting that "[t]he district court's dismissal
of Henry's original petition for failure to exhaust state reme-


                               12721


dies `terminated the litigation.' Farmer v. McDaniel, 98 F.3d
1548,1552 (9th Cir. 1996), cert. denied, _______ U.S. _______ , 117
S. Ct. 1474, 137 L. Ed. 2d 686 (1997). The relevant date is the
date on which Henry filed the present, second petition."
Henry, 164 F.3d at 1241. We held that the filing of the pres-
ent, second habeas petition, following dismissal without prej-
udice of the first petition, does not relate back to the date of
the first petition because the district court did not retain juris-
diction over Henry's original petition when the court dis-
missed for failure to exhaust. This is exactly what happened
here, and it seems that the majority's opinion and order effec-
tively makes an end-run around Henry simply because Henry
went back to state court instead of to the Ninth Circuit. See
ante at 12709 n.9. No reason occurs to me why this court's
"DISMISSAL WITHOUT PREJUDICE" (without allowing
for new filings or retaining jurisdiction) did not "take effect"
just the same as the district court's similar dismissal in Henry.


Finally, I don't see how the majority's nunc pro tunc order
could deem Keating's `amended' or `resubmitted' habeas
petition filed as of any date other than the date on which his
second petition was actually filed (January 22, 1998). To the
extent that the proposed opinion relies on Calderon v. United
States Dist. Ct. ("Kelly"), 163 F.3d 530 (9th Cir. 1998), for
the proposition (asserted in the parenthetical following the
cite to Kelly, see ante at 12708-9) that the "district court could
exercise nunc pro tunc power to deem recently filed habeas
petitions to have been filed as of the filing date of two earlier
petitions," Kelly does not in fact say this. Instead, what Kelly
says is that the district court could, in its discretion pursuant
to a motion under Rule 60(b)(6), set aside its earlier dismiss-
als and permit or deem the later habeas petitions "to be filed
in the earlier-filed [1992 and 1993] cases nunc pro tunc as of
the date they were filed in the 1998 cases." Id. at 540 (empha-
sis added). Thus, even if there were a live first petition, and

even if Keating had sought leave to amend or resubmit, and
even if the district court had allowed amendment or resubmit-
tal, it would not follow that the filing would relate back to


                               12722


August 3, 1995 (when Keating originally filed his first peti-
tion). I do not see how it could, under Henry  or otherwise.
Nor would it follow, see ante at 12709, that"[b]ecause Keat-
ing's first petition was filed before the effective date of the
Antiterrorism and Effective Death Penalty Act, the provisions
of the AEDPA do not govern resolution of this case. " Rather,
we would be back to square one: a filing (however it is
recharacterized) that occurred--even if deemed to have been
made in Keating's first petition--on January 22, a date on
which the district court had no jurisdiction with respect to the
first petition and over which it lost jurisdiction at the same
time it gained it back (when this court's mandate dismissed
the petition effective February 5).


For these reasons, I would simply hold that whatever juris-
dictional defect may have existed on January 22 was cured
once our mandate issued February 5.


II

On the merits, I am more troubled by the harmless error
analysis than with the result itself. In a nutshell: I do not see
how we can decide this case without dealing with California
v. Roy, 519 U.S. 2 (1997), which the majority opinion largely
ignores. Roy involved Beeman2 error--failure to instruct on
mens rea--in a felony-murder case. This is essentially a car-
bon copy of the instructional error in Keating . The difference
is that in Keating, there were two theories of liability (direct
perpetrator and aiding and abetting) whereas in Roy, there was
only one. If anything, it seems to me, this makes Roy's analy-
sis more pertinent, not less.


It is difficult to understand how Stromberg, Yates, Griffin,
_________________________________________________________________


2 See People v. Beeman, 35 Cal. 3d 547 (1984).

                               12723


Suniga, Qualls and Ficklin3 square with Roy. But I also do not
see how we can avoid the conundrum.4


The Stromberg line of cases says that when the jury is
given instructions on two theories of liability, one of which is
constitutionally deficient, the court must conclude with abso-
lute certainty "that the jury did not and could not have relied
on the faulty instruction to convict petitioner" in order to hold
the error harmless. See Ficklin, 177 F.3d at 1150. The defi-
ciency in the Stromberg cases has to do with constitutionally
protected, or otherwise noncriminal, conduct.


Roy, on the other hand, speaks directly to a missing element
instruction -- specifically, a missing intent  element. It makes
clear that we must apply Brecht to determine whether the type
of error that occurred here--failing to instruct on intent--is
harmless. See Roy, 519 U.S. at 4-5 (citing Brecht v.
Abrahamson, 507 U.S. 619 (1993)). This requires us to
review the record to determine the error's effect. The question
a court has to answer in this context is: Did the failure to
include intent [in the direct perpetrator] instruction have a
"substantial and injurious effect or influence in determining
the jury's verdict." Roy v. Gomez (Roy II), 108 F.3d 242, 243
(9th Cir. 1997) (en banc) (adopting analysis, reasoning and
conclusions stated in dissent to en banc decision in Roy v.
Gomez (Roy I), 81 F.3d 863, 870-71 (9th Cir. 1996) (en banc)
(Wallace, J. dissenting)). It is only if, at the end of this exer-
cise, two of us have a "grave doubt" that the error (conceded
_________________________________________________________________

3 See Stromberg v. California, 283 U.S. 359 (1931); Yates v. United
States, 354 U.S. 298 (1957), overruled on other grounds, Burks v. United
States, 437 U.S. 1 (1978); Griffin v. United States, 502 U.S. 46 (1991);
Suniga v. Bunnell, 998 F.2d 664 (9th Cir. 1993); United States v. Qualls,
140 F.3d 824, 829 (9th Cir.), vacated on other grounds, _______ U.S. _______, 119
S. Ct. 398 (1998); and Ficklin v. Hatcher , 177 F.3d 1147 (9th Cir. 1999).
4 When the district court granted Keating's original petition in April
1996, it did not have the benefit of our decision in Roy v. Gomez (Roy II),
108 F.3d 242 (9th Cir. 1997) (en banc), on remand from the Supreme
Court.


                               12724


in this case) has a substantial and injurious effect that
O'Neal's `tie-breaker' rule applies. See O'Neal v. McAninch,
513 U.S. 432, 444-45 (1995).


One way to rationalize Roy with the Stromberg line of
authority is to start with the erroneous instruction (here, direct
perpetrator) and determine whether a verdict of guilty under
it is harmless error. If not (or if two of us are in "equipose"),
then O'Neal and Stromberg apply with full force and relief
must be granted. If, on the other hand, an error would be
harmless under Roy, there is no basis for Stromberg reversal.


Since Roy tells us how to analyze harmless error in a
failure-to-instruct-on-intent case, we cannot play ostrich to the
record--or dismiss the California Court of Appeal opinion
quite so easily--as the majority does. Stated differently,
where Stromberg-type error is predicated on a Roy-type error,
I doubt that the Stromberg-type error obviates the need first
to examine the record to determine whether the underlying
Roy-type error is harmless.


From the record it appears that the error is harmless, partic-
ularly in light of our obligation to give due deference to the
California Court of Appeal's factual findings. See 28 U.S.C.
S 2254(e)(1) (" . . . [A] determination of a factual issue made
by a State court shall be presumed to be correct. The applicant
shall have the burden of rebutting the presumption of correct-
ness by clear and convincing evidence.").5 The California
Court of Appeal made quite extensive factual findings on
Keating's criminal conduct and intent. First, it discussed evi-
dence of his criminal intent throughout the years in question:


      He personally instigated the bond sales. He contin-
      ued to demand bond sales even when he knew they
      were literally worthless because of the deteriorating
_________________________________________________________________
5 This is so whether or not the AEDPA applies, although how the defer-
ence due is articulated differs somewhat.


                               12725


      condition of ACC's net worth. He was personally
      warned in November 1986 (the month Keating
      ordered Symes and Fidel to initiate the bond sales
      program) by Patricarca of the FHLB of 14 specific
      problems, including Lincoln's failure to comply with
      the direct investment regulation and not meeting its
      net worth requirement. In December 1986 Patricarca
      personally pointed out the risky nature of the invest-
      ments in Arizona real estate. In 1987 Keating sought
      the assistance of several United States senators to
      shore up his support with the FHLB Board even in
      the face of negative coverage in Forbes Magazine.
      Keating ordered the sale of one-year bonds to gener-
      ate capital in October. In February 1988 Dochow
      met privately with Keating concerning the funneling
      of Lincoln assets to cover ACC's deteriorating finan-
      cial condition. The third-quarter 1988 loss was such
      a disaster for ACC that it was quite clear ACC could

      not repay the $94.8 million tax advance from Lin-
      coln, much less any individual investor's principal,
      yet Keating brought the entire bond sales force to
      Phoenix where he personally exhorted greater bond
      sales.


ER 126-27. The court then recounted evidence of his close
involvement with the fraudulent bond sales:


      . . . The facts indicate Keating was in personal con-
      trol of Lincoln, even down to the detail of which pic-
      tures could be hung on the walls; that he selected
      both ACC and Lincoln officers; that he was in per-
      sonal contact with FHLB personnel who outlined for
      him the unsound business practices; that he was per-
      sonally aware of the deteriorating financial prospects
      of ACC and of its inability to repay Lincoln the $94
      million advanced for taxes; that he refused to pro-
      vide negative information to anyone, going to the
      extent of hiring a public relations person in Phoenix


                               12726


      to answer investors' negative telephone calls and
      ordering Fidel to purchase all available copies of
      Forbes Magazine near Lincoln offices; that the
      bonds had been rated by Moody's as below invest-
      ment grade; and that, while knowing all the negative
      trends, he still hosted the sales personnel at a posh
      party in Phoenix to encourage further bond sales to
      unsuspecting and unsophisticated members of the
      public.


ER 130-31.

Finally, the court reiterated:

       Keating was the chairman of ACC. He exercised
      the powers of an owner over both ACC and Lincoln
      by naming the officers and members of the boards of
      directors, directing policy, conducting negotiations
      with FHLB officials and other government regula-
      tors, setting the interest rates for Lincoln certificate
      of deposit accounts vis-a-vis ACC bonds, hiring per-
      sonnel, conducting meetings to encourage bond
      sales, and even down to selecting the decor at the
      Lincoln headquarters in Irvine. He personally
      reviewed all press releases prior to their issuance. He
      directed policy and procedures. He was the person in
      control.


       The individual investors . . . were not given the
      pertinent information necessary to make an informed
      judgment--information about the losses being sus-
      tained by ACC in its real estate operations and cash
      flow, the discrepancies concerning the $94 million
      tax prepayment by Lincoln advanced to ACC, the
      concerns of the FHLB about the unsafe and unsound
      operations of Lincoln and of its inability to meet its
      cash requirements due in large part to excessive cash
      outflow to ACC for management fees and dividends,


                               12727


      the FHLB concern about the enormous salaries paid
      to corporate executives, or information about the
      bond ratings made by Moody's, which rated the
      bonds as being below investment grade, risky, and
      generally described as "junk bonds." In most cases
      the individual investors were not even aware that
      they were investing in bonds, let alone subordinated
      debentures, but rather thought their investments were
      merely a form of certificate of deposit fully insured
      by the federal government.


       We conclude from the facts that the prosecution
      has amply proven a persistent pattern consistent with
      criminal conduct whereby factual representations
      were made to the purchasers of debentures which
      were inaccurate and misleading--which representa-
      tions Keating knew to be false and unfounded while
      contemporaneously failing to impart any negative
      information which, if known to the individual inves-
      tors, would have provided them the basis for an
      informed decision.


ER 135-37 (emphasis added). I do not believe that all of these
comments can be summarily dismissed or disregarded as
"dicta," as does the majority. See ante  at 12715 n.14. While
we are not bound by the state appellate court's legal conclu-
sions, both pre- and post-AEDPA law requires a considerable
degree of federal court deference to state court factual find-
ings.


Particularly in light of the deference accorded these find-
ings, and based upon my independent review of the state trial
court record, I believe it is fair and reasonable to conclude
that the trial court's failure to instruct the jury on intent was
harmless given the absolutely overwhelming evidence demon-
strating Keating's criminal intent introduced at trial. As I see
it, "there is not even a reasonable possibility, " see Roy I, 81
F.3d at 871 (Wallace, J. dissenting), based on this evidence


                               12728


that Keating did not specifically intend to "sell or offer to
sell" securities containing "untrue statements of material fact"
or securities which omitted material facts "necessary to make
the statements made . . . not misleading." See ER 145-46
("direct perpetrator" jury instructions). As such I haven't the
slightest doubt--much less a "grave doubt"--about the harm-
lessness of the instructional error in this case, and would
therefore reverse the district court's decision granting Keat-
ing's habeas petition. But either way, I have "grave doubt"
that the majority's methodology is quite on target.


                               12729



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