News You Can Use: Tenth Circuit reaffirms that restitution must be based on the offense of conviction, not relevant conduct.

The Mandatory Victim Restitution Act authorizes restitution only for the loss caused by the specific conduct that is the basis of the offense of conviction.  United States v. Mendenhall, 945 F.3d 1264 (10th Cir. 2019).

Restitution can be an afterthought at sentencing.  The parties are, understandably, far more concerned with incarceration.  However, appropriately limiting restitution is important because a large restitution order can follow a client for 20 years and make it difficult for them to get back on their feet, and stay there.  See 18 U.S.C. § 3613.

As the Tenth Circuit has recognized, “The most important thing at sentencing is determining whether the defendant will be incarcerated and, if so, for how long. Other matters, such as restitution and conditions of supervised release, are, appropriately, of secondary concern. But they are not inconsequential and deserve focused attention.” United States v. Martinez-Torres, 795 F.3d 1233, 1234 (10th Cir. 2015)

Recently, in United States v. Mendenhall, the Tenth Circuit reiterated a fundamental aspect of restitution under the Mandatory Victim Restitution Act (MVRA): a district court can order restitution only to a victim of an offense of conviction, and “only for loss caused by the specific conduct that is the basis of the offense of conviction.”  Mendenhall, 945 F.3d at 1267.

In Mendenhall, an indictment charged the defendant with unlawful possession of three specific stolen firearms, each identified by serial number.  The firearms were stolen from a pawnshop during a burglary in which a total of 62 firearms were stolen, and substantial evidence implicated Mendenhall in the burglary.  Only a dozen or so firearms, including the three identified in the indictment, were recovered and returned to the pawnshop.

The district court ordered Mendenhall to pay the pawnshop restitution in the amount of $33,763.23 for “the loss of firearms not recovered, wages for employees to conduct inventory, loss of revenue for closing of business . . . and cleanup/repairs.”  Id. at 1266.  Mendenhall did not object to the restitution order.  On plain error, the Tenth Circuit reversed.

The Tenth Circuit explained that “[d]istrict courts lack inherent powers to order restitution.”  Id.  They may only do so as authorized by statute, and the MVRA authorizes restitution only to “a person directly and proximately harmed as a result of the commission of an offense.”  Id. (quoting 18 U.S.C. § 3663A(a)(2)).  Moreover, the Supreme Court has interpreted this language as limiting restitution “only for losses caused by the conduct underlying the offense of conviction.”  Id. at 1267 (quoting Hughey v. United States, 495 U.S. 411, 416 (1990)).  Based on these limitations, Mendenhall did not owe any restitution at all.

The elements of Mr. Mendenhall’s offense of conviction were: (1) knowing possession of the firearms; (2) interstate commerce; and (3) knowing or having reasonable cause to believe the firearms were stolen.  “None of these elements caused the losses cited as the basis for the restitution order” because the “three firearms listed in the indictment were recovered and returned.”  Id. at 1268.  That Mendehall did not object to the PSR’s assertion that he was involved in the burglary was irrelevant: “Restitution must be based on the offense of conviction, not relevant conduct.”  Id. (quoting United States v. Frith, 461 F.3d 914, 916 (7th Cir. 2006)).

Finally, the Tenth Circuit panel was reluctant to find that the fourth prong of the plain error test was met—that is, whether the error “seriously affects the fairness, integrity, or public reputation of judicial proceedings”—calling it “not an easy question in a case like this one where everybody knows that Mendenhall stole the firearms and pocketed the cash from the theft.”  Id. at 1270.  However, it acknowledged that a restitution order that exceeds the amount authorized by statute “amounts to an illegal sentence,” just as a term of imprisonment above the stat max does.  Accordingly, the Tenth Circuit was bound by precedent to conclude that all four prongs of plain error were met, and it reversed the order of restitution.

Takeaways

  • Restitution can be very burdensome for our clients.
  • Because restitution is a secondary concern for everyone—the defense, the government, probation, and the court—the orders often contain errors.
  • Restitution can be ordered only for loss caused by the specific conduct that is the basis of the offense of conviction. In other words, restitution must be based on the offense of conviction, not relevant conduct.
    • Caveat: in a plea agreement, a defendant can agree to restitution beyond what is otherwise authorized by statute.
  • An excessive restitution order is an illegal sentence

News You Can Use: Tenth Circuit issues helpful decision limiting restitution in conspiracy cases

The Tenth Circuit recently issued an important decision in United States v Anthony concerning restitution in conspiracy cases. The facts are unlikely to reoccur very often, but the opinion contains some broadly applicable and helpful points of law.

Background

Mr. Anthony was convicted after trial of conspiracy to entice a child.  The evidence showed that he called an “escort service” which sent two minors to his place of business. He touched them both and had sex with one of them.  The girls had been ensnared by a pimp, and Mr. Anthony was one of over a hundred customers they had seen.

In ordering restitution, the district court held Mr. Anthony accountable for all the harm the girls suffered during the time they spent working for the pimp.  One of the girls had earlier been involved with another pimp in an enterprise wholly unrelated to the later one.  The court made no attempt to disaggregate the harm caused during the girl’s involvement with the first pimp from the harm caused during her involvement with the second.

The Decision

18 U.S.C. § 2259 generally requires proof of “but for” causation

Mr. Anthony’s first claim on appeal was that the district court should have disaggregated the harm caused during the first enterprise.  The circuit agreed.  And along the way, it ruled that 18 USC 2259, the statute governing restitution for most federal sex crimes, requires a showing of “but for” causation.  In doing so, the court rejected the government’s claim that the statute allowed liability based on a theory of multiple independent causes, which would have greatly expanded restitution liability.  Using but for causation–a familiar concept in restitution analysis generally–resolution of the claim was easy.  Mr. Anthony was obviously not a but for cause of the harms that were caused before his crime was even committed.

Restitution is limited to the harm established by the trial evidence

Mr. Anthony’s second claim was that the court shouldn’t have held him accountable for all the harm that happened during the time the girls were involved with the second pimp.  This argument rested on conspiracy law.  Conspiracy, of course, is an agreement, and he argued that his only agreement, if any, was to have sex with the girls on that one night.  The circuit also agreed with this argument (although Mr. Anthony ultimately lost because the claim wasn’t preserved).  The circuit had long held that a conspiracy conviction makes a defendant “liable in restitution for all losses that proximately result from the conspiracy itself, including losses attributable to coconspirators.”  And historically, the court had looked to the indictment to define the scope of the conspiracy and hence a defendant’s restitution liability.   But here the court held, at least in the case of a trial, that restitution has to be limited to what the evidence actually proved, not what was alleged in the indictment. 

Conspiracy liability is limited to the defendant’s own agreement

Here, the evidence only showed, at most, that Mr. Anthony joined a conspiracy to obtain the girls for sex on the night he met with them.  The reason?  Mr. Anthony’s sole purpose was to “have sex.”  Although he likely knew that his decision to pay for sex furthered the overall enterprise, that knowledge was not enough to make him a conspirator in that enterprise.  As the circuit put it, “mere knowledge” that his actions furthered an illegal enterprise, even in conjunction with his participation in a small part of the enterprise, doesn’t by itself establish that Anthony “joined in the grand conspiracy.”  Id. 

Key Takeaways

  • Be sure to take a careful look at restitution in sex offense cases.  Except child pornography crimes, Anthony teaches that restitution in the sex offense context is limited to harm that would not have occurred but for the defendant’s offense.
  • The evidence, not the indictment, controls, at least when there’s a trial. Restitution is limited to harm established by the evidence at trial, even if the indictment’s allegations are broader.
  • Traditional concepts of conspiracy liability apply in the restitution context. Conspiracy liability (including for restitution) is limited to the defendant’s own agreement, even if she knows of the wider conspiracy.

Preserve This! Gorsuch and Sotomayor Express Interest in Applying Apprendi to Restitution Orders

Hester v. United States, an opinion by Justice Gorsuch (joined by Justice Sotomayor), flags an issue that defense counsel should be preserving in appropriate cases. Certiorari was denied in Hester, but the issue may attract enough votes for a grant of certiorari in the future.

The question presented in Hester was whether Apprendi v. New Jersey applies to restitution orders. Apprendi requires that a jury find beyond a reasonable doubt any fact that increases the maximum sentence for an offense. Mr. Hester maintained that Apprendi required a jury to find the facts supporting the amount of restitution that was ordered for his offense. The circuits, including the Tenth Circuit, have uniformly rejected this argument. The Supreme Court declined to review the issue in Hester, but Justices Gorsuch and Sotomayor dissented from the denial of certiorari.

Justices Gorsuch and Sotomayor not only opined that the issue was worthy of the Court’s consideration; they strongly suggested a view on the merits: that Apprendi should, indeed, apply to restitution orders. They reasoned that “the statutory maximum for restitution is usually zero, because a court can’t award any restitution without finding additional facts about the victim’s loss. And just as a jury must find any facts necessary to authorize a steeper prison sentence or fine, it would seem to follow that a jury must find any facts necessary to support a (nonzero) restitution order.”

Justices Gorsuch and Sotomayor rejected the government’s assertion that restitution “isn’t a criminal penalty, only a civil remedy” as follows: “[T]he Sixth Amendment’s jury trial right expressly applies ‘[i]n all criminal prosecutions,’ and the government concedes that ‘restitution is imposed as part of a defendant’s criminal conviction. Federal statutes, too, describe restitution as a ‘penalty’ imposed on the defendant as a part of his criminal sentence, as do our cases.” As a coup de grâce, Justices Gorsuch and Sotomayor then invoked the Seventh Amendment: “Besides, if restitution really fell beyond the reach of the Sixth Amendment’s protections in criminal prosecutions, we would then have to consider the Seventh Amendment and its independent protection of the right to jury trial in civil cases.”

Equally telling about the merits of the government’s argument against applying Apprendi to restitution is Justice Alito’s opinion concurring in the denial of certiorari. He does not defend the lower courts’ interpretation of Apprendi but, instead, suggests Apprendi should be overruled.

Takeaways 

  • In cases where the applicability or amount of restitution is disputed, preserve an argument that Apprendi requires that the applicability and amount of restitution be determined by a jury beyond a reasonable doubt. You can preserve the argument by filing a written objection to the PSR’s recommendation that restitution be ordered and by raising the argument again at the sentencing hearing.
  • Don’t be deterred from preserving a sound argument just because the circuits have uniformly rejected it. The circuits can be (and have been) uniformly wrong!

 

 

News You Can Use: 10th Circuit Says Garnishment Allowed When Restitution Is “Due Immediately” – United States v. Williams

Check out United States v. Williams, where the Tenth Circuit recently held that a restitution order specifying that restitution is “due immediately” creates an immediately enforceable obligation to pay the full restitution amount, even though the Schedule of Payments also provides for smaller, periodic payments.

Background: The Internal Revenue Service investigated defendant Ricky Williams for tax fraud. The investigation resulted in USAA Savings Bank freezing an account in defendant’s name, which contained funds related to the fraud. Mr. Williams pleaded guilty to one count of tax fraud and was ordered to pay $240,361 in restitution to the IRS, with a $100 special assessment, for a total liability of $240,461. 

The Mandatory Victims Restitution Act (MVRA) provides that “[a] restitution order may direct the defendant to make a single, lump-sum payment, partial payments at specified intervals, in-kind payments, or a combination of payments at specified intervals and in-kind payments.”  18 U.S.C. § 3664(f)(3)(A).  Here, the Schedule of Payments required restitution as follows:

A. Lump sum payment of $240,461.00 ($240,361.00/restitution; $100.00/special assessment) due immediately, balance due . . . in accordance with . . . F below . . . .

F. Special instructions regarding the payment of criminal monetary penalties:

If restitution is not paid immediately, the defendant shall make payments of 10% of the defendant’s quarterly earnings during the term of imprisonment; and If restitution is not paid in full at the time of release from confinement, the defendant shall make payments the greater of $100.00 per month or not less than 10% of the defendant’s gross monthly income, as directed by the probation officer . . . .

Slip op. at 3.

A few months after Mr. Williams was sentenced, while he was in prison, the government applied for a post-judgment writ of garnishment against one of his bank accounts, in order to collect the restitution owed.  The district court held that the entire amount was immediately due, per Section A of the Schedule of Payments, and that Section F served as a back-up schedule for the payment of whatever amounts were not paid under Provision A.  After the trial court granted the application for a writ of garnishment, Mr. Williams appealed, representing himself pro se.

Issue: Was the government permitted to immediately collect the full restitution amount (as provided in section A), or was it limited to 10% of Mr. Williams’ quarterly earnings during his term of imprisonment (as provided in section F)?

Holding: In an opinion by Judge McKay, joined by Judges Phillips and O’Brien, the Tenth Circuit affirmed.  Its decision was driven by the doctrine requiring “deference to the district court’s interpretation of its own order,” so long as it is reasonable.  Slip op. at 5 (quoting Auto-Owners Ins. Co. v. Summit Park Townhome Ass’n, 886 F.3d 863, 872 (10th Cir. 2018)).  Concluding that the district court’s “interpretation of its own prior [restitution] order in this case [was] reasonable,” the Tenth Circuit held that the full amount of restitution was due immediately.

Takeaways:

  • Remember that the MVRA allows restitution to be paid in a lump-sum amount, according to a specified schedule, through in-kind payments, or a combination of scheduled and in-kind payments.  See 18 U.S.C. § 3664(f)(3)(A).  If restitution is on the table, consider whether you want to advance arguments about the appropriate manner of payment.
  • If the Schedule of Payments says that X amount of restitution is “due immediately,” then your client may be on the hook for that entire amount as soon as he is sentenced—even if the Schedule of Payments also seems to provide for smaller, periodic payments.
  • To avoid any confusion, make sure that you, the government, and the judge are all on the same page with what restitution is due when.  If the order is ambiguous, the judge’s interpretation (if reasonable) will probably control.