Case o' The Week: Ninth Fine with Fuzzy Fiduciaries -- Milovanovic and Honest Services Fraud

We in the defense bar are never happy. In a case of first impression, an en banc Court of the Ninth Circuit has added elements to the "honest services" theory of the commonly-used mail fraud statute. 

We like more elements of proof.

The problem? Because these new elements are so broadly defined, the decision will effectively permit the continued expansion of federal criminal juridiction into what are really state-law crimes.  United States v. Milovanovic, (9th Cir. Apr. 24, 2012) (en banc), decision available here.

Players: Decision by Judge Tallman, interesting concurrence by Judge Clifton.

Facts: The State of Washington has tests for non-residents to be licensed to operate trucks. Id. at *2. The defendants allegedly took bribes to help truckers pass the exam. Id. None of the defendants were government employees: one was an independent contractor. Id. 

The district court dismissed the mail fraud indictment, holding that there was no “honest services” fraud because no defendant had an agency or employment relationship with the state. Id. at *3. The district court also held that “identifiable economic harm” was required as an element of mail fraud. Id. at *3. 

A three-judge panel of the Ninth Circuit held that fiduciary duty is not a requirement of honest services fraud. Id. The case went en banc.

Issue(s): 1. Independent Contractors Fiduciaries? “We now consider whether the Supreme Court [in Skilling] intended to require a breach of fiduciary duty as an element of honest services fraud under 18 U.S.C. §§ 1341 and 1346, and, if so, whether the breach of a trust relationship, not arising to a formal fiduciary duty, will suffice . . .  In light of the Supreme Court's decision in Skilling, the parties agree that a breach of fiduciary duty is a required element of honest services fraud under §§ 1341 and 1346. Where they disagree, however, is whether the Supreme Court intended to require a formal, or classic, fiduciary duty or whether the statute also reaches those who assume a comparable duty of loyalty, trust, or confidence. Defendants argue that because [one defendant] was an independent contractor and Milovanovic did not contract with the State directly, there was no recognized fiduciary relationship between them and the State of Washington.” Id. at *5. 

2. Risk of Economic Harm Required? “We address . . . whether, as the district court rules, economic harm is required to establish a cognizable [Mail Fraud] offense.” Id. at *1.

Held: 1. Independent Contractors Fiduciaries? “We hold that a fiduciary relationship is an element of honest services fraud under 18 U.S.C. §§ 1341 and 1346, but that the fiduciary relationship need not be a formal, or classic, fiduciary relationship. Rather, §§ 1341 and 1346 similarly reach those who assume a comparable duty of loyalty, trust, and confidence, the material breach of which, with the intent to defraud, deprives the victim of the intangible right to honest services.” Id. at *11.

 2. Risk of Economic Harm Required? “We further hold that foreseeable risk of economic harm is not a necessary element when evaluating whether a party breached a fiduciary duty in violation of the honest services fraud statutes, §§ 1341 and 1346. We adopt, instead, the materiality test and hold that the Mail Fraud Statute requires fraudulent intent and a showing of materiality.” Id.

Of Note: The Mail Fraud Statute, 18 USC § 1341, is a hoary old law first enacted in 1872. Despite its age, it has undergone considerable litigation and revision in the last twenty years – beginning with the Supreme Court’s 1987 decision in McNally. Judge Tallman begins his analysis in Milovanovic with a helpful explanation of the history of the Mail Fraud statute: it is a good starting point to understand this commonly-charged offense. Id. at *4-*5. 

How to Use: The good news is that the en banc Court has held that the “honest services” theory of Mail Fraud requires, as an element, “a breach of a fiduciary duty.” Id. at *6. The bad news is that the definition of “fiduciary” is “broad” and includes “informal fiduciaries.” Id. 

Whether the defendant charged with Mail Fraud was in fact a “fiduciary” is a jury question. Id. There’s much mischief to be made with this vague term -- make a point of challenging new jury instructions defining “fiduciary.” See id. at *11-*12 (Clifton, J., concurring) (noting ambiguity in the definition of the word, “fiduciary.”)

                                               

For Further Reading: Allow us to “alembicate what has gone before.” See three-judge panel Milovanovic decision here.  You’ll recall that Judge Fernandez wrote a compelling dissent to the three-judge opinion in Milovanovic. See blog here.  

As we noted in the original Milovanovic blog, Judge Ferndandez’s dissents have an interesting habit of evolving into Supreme Court decisions. See, e.g., Printz v. United States, 521 U.S. 898, 928 (1997). 

With luck, the Ninth’s en banc decision in Milovanovic may not be the last word on this important new development in mail fraud law.

 Image, "What is a Fiduciary?" from http://www.pfac-pro.org/ohana/website/index.cfm?p=118001

Steven Kalar, Senior Litigator ND Cal FPD. Website at www.ndcalfpd.org

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Research & Writing Attorney Lynn Deffebach

The defense community lost one of its most dedicated and effective members this week. After a five year struggle with breast cancer, Oregon research and writing attorney Lynn Deffebach died peacefully at home last Thursday at the age of 55. As a national expert on Bureau of Prisons litigation, she has been a resource for defenders around the country, teaching continuing legal education classes, writing articles, and providing consultations with attorneys, prisoners, and families of prisoners. Her patient and gentle advice saved centuries of time for clients and her counsel assured that the complexities of the federal system were understood, even when clients were angry or impaired. As a litigator, her fierce tenacity, even against great odds, consistently brought cases to successful resolutions. 

After a stint with the Peace Corps in Samoa and in Washington, D.C., Lynn graduated from Lewis and Clark Law School. She found her way on to one of the Oregon Federal Public Defender trial teams, where her talents and energy quickly resulted in her being brought on full time. Her BOP work had its origins in the 1995 retroactive marijuana sentencing amendments. During group meetings, she began learning of the many ways statutes that were meant to assist prisoners and accelerate release were either under-utilized or completely neglected. For the next seventeen years, she litigated issues involving good time credits, access to community corrections, sentence reductions for drug treatment, and other prison issues in the district court, often to the Ninth Circuit, and twice to the Supreme Court. The picture here is Lynn on the steps of the Supreme Court after the oral argument in Clark v. Martinez, where she was part of the team that helped end indefinite detention of Mariel Cubans who had completed their sentences.

Lynn’s sophisticated approach to legal issues – especially statutory construction – made every team she worked on better, as did her qualities of compassion, courtesy, and humor. For lawyers she worked with and against, her intelligence and skill were inspiring, but it was her kindness and heart that provided a goal for the kind of attorneys we want to be. And she generously passed along her skills and talents by coaching high school students on Constitution teams. Shortly after she went to the Supreme Court the second time on the good time issue in Barber v. Thomas, she coached her Lincoln High students at nationals in D.C., including a team visit with Justice Sotomayor. Lynn loved to read, listen to music, and travel, but most of all to spend time with her nieces and nephews. We miss her.

Steve Sady, Chief Deputy Federal Public Defender, Portland, Oregon



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Meras v. Sisto, No. 09-15399 (Kozinski with Gettleman, Sr. D.J.; Bea concurring).

"[The Petitioner] claims that testimony introduced during his trial violated his Sixth Amendment right to confrontation.  He's probably right, but he loses anyway." (4320).  This is in the first paragraph of the opinion, and pretty well sums up petitioner's plight, and fate.  He was charged with robbery, burglary, and assault in state court.  His first trial ended in a hung jury.  At the trial, a criminalist testified about DNA analysis.  At the second trial, the criminalist was busy (her mother had cancer) and so a supervisor testified about the lab results.  The supervisor had technically reviewed the findings and signed as a reviewer.  The petitioner's appeal was after Crawford, but before Melendiaz-Diaz and Bullcoming.   As a result, under AEDPA, the question is whether the state court reasonably decided the issue.  The 9th found it did, at the time, given the issues left open in Crawford, and the vigorous dissents in later cases.  The state court at that time was wrestling with open confrontation questions, and so, under AEDPA, and deference, he does not get relief.  The 9th writes that, "We therefore have a case here where the state court probably committed constitutional error, but we are not free to correct it."  (4327).  Moreover, the issue of whether a supervisor by reviewing can testify was not raised in cert petitions to the Supremes.  Bea, concurring, states that the majority is not conducting de novo review, and so should not say that petitioner's constitutional rights were violated.  The issue here is deference, and not a decision on the merits de novo.  The facts here, with the supervisor involvement, makes this still an open question, even after Bullcoming.

Noble v. Adams, No. 08-17655 (4-19-12) (Wallace with Nelson and Bea).

The 9th vacates the dismissal of a petition and remands to the district court to determine if a 4 ½ month delay between the denial of a petition in state superior court and the appeal was "unreasonable" under California's standard of reasonableness.  California has excused delays of longer than 60 days in some instances, and this may be one.  The petitioner was pro se, and seemed to have been trying to amend his petition when he filed a second.  The 9th also finds that the mailbox rule clicked in to make the petitioner's mailing of the petition viable.

Case o' The Week: FSA not All Cracked Up to Be -- Austin & Crack Resentencing for 11(c)(1)(C) Deals

Hard, at times, to explain the vagaries of federal sentencing. In Austin, the Ninth (following a fractured Supreme Court), denies relief to a defendant seeking a reduced sentence under the Fair Sentencing Act (the legislation that reduced the unfair and disparate sentences for crack cocaine).

The rub?

His 11(c)(1)(C) plea agreement didn't refer to the guidelines (or didn't refer to them clearly enough). United States v. Austin, 2012 WL 1322204 (9th Cir. Apr. 18, 2012), decision available here.

Players: Hard fought appeal by ED Cal FPD Dan Broderick and AFPD David Porter. Decision by Judge Bea, joined by Judges Wallace and D.W. Nelson.

Facts: Austin was charged with: i) possess with intent to distribute over 50 grams of crack, ii) a § 924(c) count, iii) a § 922(g) charge, and iv) allegation of a prior drug case. Id. at *1. He pleaded guilty pursuant to an 11(c)(1)(C) deal and was sentenced seventeen years. Id. 

Years later he filed a motion under 18 USC § 3582(c)(2) to reduce his sentence under the new crack guidelines. Id. The district court granted the motion and knocked two years off. Id. 

The government appealed; while the case was pending the Supreme Court decided Freeman v. United States, 131 S. Ct. 2685 (2011).  

Issue(s): “In Freeman, a four-justice plurality and Justice Sotomayor, concurring in the judgment, concluded that a sentence imposed pursuant to a (C ) agreement does not preclude eligibility for § 3582 (c)(2) relief . . . . Justice Sotomayor carved out two exceptions where a sentence imposed pursuant to a (C) agreement is nevertheless ‘based on’ a Sentencing Guidelines range.” Id. at *2 . . . The second exception, which Austin argues is applicable here, provides that . . . [a]s long as [a guideline’s sentencing range] is evident from the agreement itself, for purposes of § 3582(c)(2) the term of imprisonment imposed by the court in accordance with that agreement is ‘based on’ that range.” Id. at *3 (quoting Freeman) (emphasis in original).

Held: “We conclude that Justice Sotomayor's concurrence in Freeman controls this case because Austin's plea agreement was a Federal Rule of Criminal Procedure 11(c)(1)(C) plea agreement (‘(C) agreement’). Applying her opinion, we hold that the district court lacked jurisdiction to reduce Austin's sentence because the imposed seventeen-year sentence was ‘based on’ the parties' plea agreement and not on ‘a sentencing range that has subsequently been lowered by the Sentencing Commission.’ § 3582(c)(2); see Freeman, 131 S. Ct. at 2697–98. ..” (Sotomayor, J., concurring).”

Of Note: To be fair, this beef is primarily for the fractured Supremes and Freeman – not the Ninth – but really how many (c)(1)(C) deals are not driven by the guidelines, at their core? Justice and USAOs are so slavishly devoted to “advisory” guidelines that any deal is driven by the guidelines at sentencing – and inevitably the high crack guidelines are the primary driver for negotiated dispositions. 

In fact, according to Austin’s appellate brief, his (C) plea agreement refers to the guidelines five times in four sentences – and specifically concedes that the Court would determine his advisory sentencing range before considering the recommended seventeen-year sentence. See Answering Brief at 2010 WL 6351294, *3-*4. If the parties had simply ballparked the offense level in the plea agreement (OL 31), id., Austin would have certainly received his crack-amendment reduction. Hard to understand why other crack defendants have gotten their FSA reductions, but because of this simple omission in the plea agreement, Austin does not.

How to Use: We love ‘em, the bench hates ‘em: (C) deals make the world go round. Federal Rule of Criminal Procedure 11(c)(1)(C) provides for “locked” dispositions that contain recommendations from the parties. If the district judge disagrees, the Court is free to reject the deal – but then either party can then pull out of the agreement. Judge Bea does a good job in Austin explaining how (C) agreements work, and reviews the advisements necessary for this special breed of deal. Austin, 2012 WL 1322204 at *3. Austin is a useful place to start to understand this valuable disposition tool.                     

For Further Reading: (C) deals are good. (C) deals are particularly good after Booker, to provide certainty amongst the uncertainty caused by the advisory guidelines. For an interesting and compelling explanation of why (C) deals should be used more broadly in our post-Booker world, see Wes Porter, The Pendulum in Federal Sentencing Can Also Swing Toward Predictability: A Renewed Role for Binding Plea Agreements Post-Booker, 37 Wm. Mitchell L. Rev. 469 (2011), available here.

Image of crack cocaine from http://youthrise.org/action/cocaine-and-crack

Steven Kalar, Senior Litigator N.D. Cal. FPD. Website at www.ndcalfpd.org

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U.S. v. Austin, No. 10-10001 (4-18-12)(Bea with Wallace and Nelson).

The defendant agreed to a stipulated 11(c)(1)(C) sentence, on which he was sentenced. He subsequently moved for a reduction of his crack sentence because of the retroactivity of the Guidelines amendment. It was granted. However, what the district court granted, the 9th takes away. The 9th, applying Freeman v. US, 131 S. Ct 2685 (2011), and specifically Sotomayer's concurrence (which is the controlling opinion in a fragmented Court), determines that the specified agreed upon plea controls because it was not tied to a Guideline range, nor is it evident from the plea itself that the sentence was based upon the Guidelines range eligible for reduction.  Here, there was a firearm charge too, and the deal was for a number of years for all the charges.  As such. the 9th concludes that the courts lack jurisdiction to reduce the sentence because it was based on the agreement of the parties and not on a particular Guidelines range that had been subsequently reduced.

Cross v. Sisto, No. 08-17324 (4-18-12) (Bea with O'Scannlain and Graber).

The petitioner filed a number of post-conviction challenges to his state (California) second degree murder conviction. One of the petitions was denied by the California Supreme Court citing only ex parte Swain and Duvall.  Swain has been interpreted as holding a petition was untimely. The district court thus found. The 9th reversed, holding that Swain was not only concerned with untimeliness, but could also be considered, with Duvall, a pleading issue. Thus, the petitioner was not barred. Under AEDPA, his petitions had tolled the one year limitations period and was timely.

U.S. v. Swank, No. 11-30072 (4-16-12) (Bybee with W. Fletcher and Fisher).

The 9th considers what constitutes "custody, care, or supervisory control" for an enhancement of +2 in an abusive sexual contact guidelines sentencing. In this case, the defendant lived with his wife, and was responsible with her for the care of her niece. The "custody, care, supervision" is broadly construed, following the application note, and really looks to who is responsible or has authority over the victim, usually a child. The enhancement here was not error.

Case o' The Week: Nosal, No Sale, for Gov't -- - Nosal and the CFAA

Chief Judge Alex Kozinski

"Minds have wandered since the beginning of time and the computer gives employees new ways to procrastinate, by gchatting with friends, playing games, shopping or watching sports highlights. Such activities are routinely prohibited by many computer-use policies, although employees are seldom disciplined for occasional use of work computers for personal purposes. Nevertheless, under the broad interpretation of the CFAA, such minor dalliances would become federal crimes. While it’s unlikely that you’ll be prosecuted for watching Reason.TV on your work computer, you could be. Employers wanting to rid themselves of troublesome employees without following proper procedures could threaten to report them to the FBI unless they quit. Ubiquitous, seldom-prosecuted crimes invite arbitrary and discriminatory enforcement." 

United States v. Nosal, 2012 WL 1176119, *4 (9th Cir. Apr. 10, 2012) (en banc), decision available here.


Players: Important win for appellate gurus Ted Sampsell Jones (argued), and Dennis Riordan. Decision by CJ Kozinski, joined by eight judges. Dissent by Judge Silverman, joined by Judge Tallman.

Facts: Nosal worked for an executive search firm. Id. at *1. He started a competing company, and convinced some of his former colleagues to download confidential files from his old firm, to use in his new one. Id. “The employees were authorized to access the database, but [the executive search firm] had a policy that forbade disclosing confidential information.” Id.

Nosal was indicted on many counts, including violations of the Computer Fraud and Abuse Act (CFAA), 18 USC § 1030. Id. Nosal challenged the CFAA counts, arguing that this wasn’t unauthorized access into a computer (hacking), but (if proved true), was theft of data by folks who had legitimate access to the files.

ND Cal District Judge Marilyn Patel agreed and dismissed the CFAA counts, holding that the CFAA prohibits hackers from accessing computer information without authorization – not theft by employees who are authorized to access the data. Id. A three-judge panel reversed. See generally blog description of three-judge panel decision, here.

The case went en banc.

Issue(s): “Computers have become an indispensable part of our daily lives. We use them for work; we use them for play. Some-times we use them for play at work. Many employers have adopted policies prohibiting the use of work computers for nonbusiness purposes. Does an employee who violates such a policy commit a federal crime? How about someone who violates the terms of service of a social networking website? This depends on how broadly we read the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030.” Id. at *1 (emphasis added).

Held: “We need not decide today whether Congress could base criminal liability on violations of a company or website’s computer use restrictions. Instead, we hold that the phrase ‘exceeds authorized access’ in the CFAA does not extend to violations of use restrictions. If Congress wants to incorporate misappropriation liability into the CFAA, it must speak more clearly.” Id. at *7.

Of Note: Gallons of ink will be spilled on Nosal and its impact on computer crimes – it is a very important case. Putting all that aside, read Nosal simply for the enjoyment of joyful legal writing. CJ Kozinski – a computer geek in judge’s clothing – gets it: the government’s interpretation of the CFAA would have criminalized logging on a work computer and “g-chatting with friends, playing games, shopping or watching sport hightlights.” Id. at *4.

Are you of a libertarian bend, prone to tuning into “Reason.TV” while at work? Id. Do you hit Ebay, while filling out timesheets and CJA vouchers? Id. at *5 &n.8. Visit Hulu and JDate? Id. Netflix and Pandora? Id. Do you describe yourself on Craigslist’s dating site as “talk dark and handsome,” when you’re really “short and homely?” Id. at *5. The Chief has no problem with you getting fired – but he and the Ninth don’t want you prosecuted for a federal crime.

How to Use: Fellow blogger Steve “Rule of Lenity” Sady loves Nosal - and you should too. CJ Kozinski explains that the rule is not only intended only to protect citizens, who need fair notice of criminal laws. Id. The Rule of Lenity also ensures “that Congress will have fair notice of what conduct its law criminalizes. We construe criminal statutes narrowly so that Congress will not unintentionally turn ordinary citizens into criminals.” Id. at *7. Great quotes for the defense bar’s favorite rule of construction.

For Further Reading: Are you making too much of a “simple little case,” bringing cutting-edge challenges on “silly issues” that make prosecutions slow and expensive? You must have been hanging out with Carl Gunn. For three decades Carl has been the government’s gadfly while serving in three Defender offices – you’ll remember him as the rebel who “gunned” for the Marshal’s shackling policy in L.A.. See Howard blog here.

Carlton Gunn

 Carl’s now semi-retired, and is maintaining a very interesting blog in his new private practice life. See "Hanging out with Carl" blog here.  Hit Carl’s blog for a great essay on challenging “controlled substance” priors in federal court – it is a valuable new site to add to your RSS feed.



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"Reason TV" logo from http://www.reason.tv/


Steven Kalar, Senior Litigator N.D. Cal. FPD. Website at www.ndcalfpd.org

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U.S. v. Goodbear, No. 10-30381 (4-13-12) (Tallman with McKeown and Moskowitz, D.J.)

The defendant's husband, and co-defendant, beat to death their young daughter. The defendant stood outside the bedroom door for thirty minutes while the beating took place. She then, with her other child, tried to cover up with a lie about the beating. She herself was pregnant at the time, a victim of abuse herself, and suffered from mental conditions, including PTSD. She pled to misprision of a felony. Her sentence was 37 months, concurrent with assault resulting in serious bodily injury (another child). The issues on appeal were the adjustments for a dangerous weapon used (a belt) for the assault and whether use of a minor could be applied to misprision when the acts were the co-defendant having the child lie. The 9th affirms on these issues. A belt can be a dangerous weapon in the context of how it was used (here against a small child). As for misprision, the defendant knew the husband was using the child to lie, and thus the adjustment permissible. The 9th also finds that the sentence was reasonable. However, it vacates and remands for resentencing because the sentence was for 37 months on misprision, and the stat max is only 36 months. The court sentenced her on both counts but said the 37 months went to misprision.

U.S. v. Kelly et al., No. 11-30084 (4-13-12)(Gwin, D.J., with Paez and Murguia).

The 9th affirms convictions against protesters at a navy base where nuclear submarines were based. The 9th rejected the defense that international treaties against bombing defenseless cities controls. The 9th also held that the jury instruction for "malicious" was not error when it described it as "wrongly and without legal justification or excuse." The defendants included two priests and an 80-year old nun.

Brown v. Ahern, No. 11-15767 (4-12-12) (Hug with B. Fletcher and Paez).

Suppose the state arguably violates its speedy trial requirements. Can habeas be used for an interlocutory appeal to get relief? In extraordinary cases, where there is a proven record of harassment or documented bad faith, possibly. However, in all other situations, and this includes this case, a violation does not get you the avenue for habeas relief. Speedy trial may be an affirmative defense, or there may be justifications, but in any case, it can wait.

U.S. v. Nosal, No. 10-10038 (4-10-12) (en banc) (Kozinski for majority; Silverman with Tallman dissenting).

This opinion rejects a broad expansive reading of the Computer Fraud and Abuse Act (CFAA), 18 USC 1030, and adopts a narrow reading that criminalizes improper access (hacking) but not misuse. The case here concerned an employee who violated a company's confidential use of information policy to transfer trade information to a rival. The defendant argued that the CFAA targeted hackers, not individuals with authorized access. The 9th, here, agreed, widening a circuit split. Examining the statute, and language, the 9th construed the language to follow the intent against hackers or those who are not supposed to have access. The government's argument that it would never ever try to use this statute in an overbroad manner (but see money-laundering etc.) was unpersuasive and its reading of the language strained. The dissent concentrated not on the parade of horribles imagined by the majority, but focused on the facts in this case, where employees violated policy to take what was not their's and give valuable information to a rival. The dissent regards the statute as plainly written, and not strained, and written in an expansive manner to apply to situations like this.

U.S. v. Wilbur et al., No. 10-30185 (4-6-12) (W. Fletcher with Reinhardt; concurrence and dissent by Rawlinson).

The defendants were convicted of an 8-year conspiracy to violate the Contraband Cigarette Trafficking Act (CCTA). They sold cigarettes on the Swinomish Reservation and failed to pay state and federal taxes. On appeal, the 9th found that there were really several conspiracies; that some charges were barred by the statute of limitations; that there was a contract with the state for some years; but that from 2005 to 2007, cigarettes sold were "contraband" under the CCTA. The 9th rejected the treaty arguments raised by the defendant as well as the arguments over ambiguity in the tax laws and due process. Although this appeal would seem specialized, covering cigarettes on an Indian Reservation, the analysis over conspiracies, charging indictments, and variances in proof. The 9th, examining the conspiracies, found that the evidence proved two conspiracies, differing in time, with a gap. The defenses of statute of limitations and of variances were not waived. Rawlinson dissented from the holding for a statute of limitations and variance. She argues that a statute of limitations is an affirmative defense that was never raised (although, the majority found, it is in due process). She also would examine variance allegation here under plain error and she would find that there was an overarching conspiracy rather than two.

Case o' The Week: Breach to the Third -- Manzo II, Breach, IAC, and "Law of the Case"

How many times does the Ninth have to say that the government needs to keep its promises and stand by its deals?

Three, so far, in 2012 (and its only April!)

United States v. Jose Manzo, (Manzo II) 2012 U.S. App. LEXIS 6838 (Apr. 5, 2012), decision available here.

Players: Big win by ED WA AFPD Matthew Campbell. Decision by Judge Gould.

Facts: Manzo was charged with possession of precursors to manufacture meth, and with distribution of meth. Id. at *2. He went to trial on the manufacturing case and was found guilty; sentencing was continued pending resolution of the distribution case. Id.

Manzo then pleaded guilty pursuant to a plea agreement in the distribution case. Id. In the agreement the government agreed to offense level (OL) 34, and to a three-level reduction for acceptance. Id. at *2-*3.


Sentencing came, and Probation went south: the PSR grouped the two offenses, converted the precursor and meth to the marijuana equivalency as directed by the guidelines, added the marijuana amounts, and came up with offense level 38. Id. at *3. The PSR also refused to give Manzo acceptance, because he had gone to trial on the manufacturing case. Id.

At sentencing, the government abandoned the OL 34 recommendation and endorsed OL 38, and didn’t recommend the acceptance reduction. Id. at *5.

Defense counsel didn’t argue breach. Id.

Manzo – who expected no more than 14 years with his deal – got hammered with 24 at sentencing. Id. In a mem dispo (“Manzo I”) the Ninth upheld the sentence on direct appeal, under plain error review. Id. at *6.

Issue(s):

1. IAC: “Manzo argues that his counsel gave him ineffective assistance of counsel.” Id. at *8.

2. Breach: “Manzo contends that the government breached its plea agreement with respect to the distribution sentence by merely agreeing before the district court that in light of the grouping, a base offense level of 38 was a correct calculation without recommending a base offense level of 34, per the agreement’s terms, and by not recommending a downward departure for Manzo’s acceptance of responsibility.” Id. at *11.

Held:

1. IAC: “We agree with Manzo that his counsel’s failure to anticipate that the offenses would be grouped for sentencing purposes and then advise Mazo to move to withdraw his agreement was constitutionally deficient.” Id. at *9.

2. Breach: “[T]he government had agreed that a base offense level of 34 would apply to Manzo’s sentence and promised to recommend a 3-level downward departure upon Manzo’s acceptance of responsibility. At the sentencing hearing, however, the government did neither and so breached the express terms of the plea agreement.” Id. at *13.

Of Note: The second time was a charm, for Manzo.

  The present case was decided on habeas review. Three years ago, on direct appeal, a different three-judge panel of the Ninth held that the government didn’t breach. See Manzo I, 337 Fed. Appx. 643 (9th Cir. June 1, 2009) (mem.) (Per curiam, Judges Canby, Thompson and Callahan).

In this week’s habeas “Manzo II,” Judge Gould acknowledges the earlier mem dispo, but explains that his panel isn’t bound by that decision – quoting authority that explains that the “law of the case” doctrine doesn’t apply when “the first decision was clearly erroneous.” Manzo II, 2012 U.S. App. LEXIS 6838 at *13 & n.3 (citation omitted).

For appellate folks, footnote three is the most intriguing corner of this interesting case: a welcome tool to distinguish a “conclusory sentence” in a previous panel’s “summary disposition.” Id. at *13-*15 & n.3.

How to Use: “Don’t breach” seems a recent Ninth theme. See recent blogs on breach here. Judge Gould explains – yet again – what the government is to do when its plea agreement contains incorrect guideline calculations. Id. at *16. Turns out it isn’t that hard, to keep a promise: an AUSA is to acknowledge the correct guidelines, but argue for lower guidelines reflected in the negotiated deal. Id. 

With three big Ninth breach decisions in the last four months, there’s certainly plenty of guidance on how to handle the situation . . . .

For Further Reading: Judge Gould, author of Manzo II, replaced Judge Beezer when he went senior in 1996. We’re sad to report that Judge Beezer passed away last week. For a review of some notable criminal-law decisions by Judge Beezer – including the original Carty case – see blog entries here.

 Image of "Breach" from http://www.moviewallpaper.net/wpp/Ryan_Phillippe_in_Breach_Wallpaper_2_1024.jpg

Steven Kalar, Senior Litigator N.D. Cal. FPD. Website at www.ndcalfpd.org

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U.S. v. Manzo, No. 10-35848 (4-5-12)(Gould with Schroeder and Alarcon).

On a 2255, arguing IAC, the petitioner got some relief for some bad plea advice. The petitioner had entered into a plea agreement but was blind sided, as was the government, by the grouping rules, which lumped together the manufacturing amounts of meth with the distribution. The offense level shot up to 38 from an expected 34. Moreover, the government, at sentencing, did not even argue for acceptance, although the plea said it would so recommend. The 9th vacated the sentence, and remanded. It found that counsel had been ineffective in failing to advise about the grouping rules; and when made aware, had failed to withdraw. The 9th hesitated in finding prejudice, however, because of the possibilities of the petitioner not having much choice, or other means. The determination of prejudice would be remanded to the court. The 9th did the same with the issue of the breach of plea, finding that the question of prejudice needed examination. The case went to a different judge.

Although the opinion came out on April 5, it contained no cite or analysis of the two recent Supreme Court IAC plea cases, Frye and Cooper.

Congratulations to AFPD Matt Campbell, Federal Defenders of E. Wa. (Spokane).

U.S. v. Onyesoh, No. 10-50480 (4-4-12) (Zouhary, D.J., with W. Fletcher and Fisher).

Under 18 USC 1029, involving access device fraud, the defendant gets an enhancement if he has a usuable access device (credit card). What if the credit card numbers were expired? The 9th holds that an expired access device is not "usable." The legislative history was bare on this issue, and the 9th looked to whether the actual card could be used. In this case, with 500 expired credit card numbers, a +12 level Guideline enhancement was at stake. The 9th vacated and remanded.

Schneider v. McDaniel, No. 09-16945 (Wallace with M. Smith; concurrence and dissent by Noonan).

In a habeas case, the 9th affirms the denial of a petition. AEDPA deference applies to the introduction of evidence and many claims did not relate back. The 9th also holds that the federal period under AEDPA was not tolled despite the petitioner's mental health issues at the time. The petitioner could have gone back to state court. Noonan, dissenting from this, argues that the petitioner was too mentally ill to have been able to pursue his claims federally or state.

On the Importance of George II - the Constitutionality of SORNA

King George Augustus II

Good news in the Ninth: all constitutional challenges to SORNA are fair game again in the Circuit, since the Court vacated the conviction of Mr. George and dismissed the case in United States v. George, ___F.3d ____, No. 08-30339, slip op. 2593 (9^th Cir. Mar. 7, 2012), 2012 WL 718297 (decision available here). 

The short opinion in George II doesn’t reflect its significance.

Mr. George’s original appeal resulted in the Ninth Circuit’s rejection of the following challenges: lack of state implementation at the time of his travel, Congressional authority under the Commerce Clause, and an Ex Post Facto Clause as applied to Mr. George. United States v. George , 625 F.3d 124 (9^th Cir. 2010). (available here). 

The 9^th Circuit Court of Appeals dismissed George II, relying only upon the narrow grounds articulated in United States v. Valverde, 628 F.3d 1159 (9^th Cir. 2010). The dismissal came in the wake of the Supreme Court’s consistent, but more limited decision in Reynolds v. United States, 132 S.Ct. 975 (2012) holding that SORNA requires a valid AG rules implementation for SORNA to apply to pre-act offenders. Mr. George had traveled prior to the August 1, 2008 SMART guidelines effective date. The Valverde and Reynolds decisions both opened the door to the subject matter jurisdiction challenge, which cannot be waived and may be raised at any time. United States v. Pheaster, 544 F.2d 353, 360-61 (9^th Cir. 1976). Whether or not a statute was in effect on a given date is an issue of subject matter jurisdiction, United States v. Caperell, 938 F.2d 975, 977 (9^th Cir. 1991). 

Most importantly, the George II dismissal vacates the entirety of the original George opinion. Now all constitutional challenges are again available within the 9^th Circuit. Opposition arguments to the Affordable Health Care Act, and the outcome of the litigation pending before the Supreme Court, could impact SORNA. If Congress can’t mandate insurance purchases, how can the Commerce Clause give Congress the authority to mandate a non-commercial registration requirement for someone who simply wishes to exercise his constitutional right to travel interstate? Justice Sotomayor’s opinion in Carr v. United States 130 S.Ct. 2229(2010) should also support constitutionality challenges beyond pre-effective date actions. While Carr avoided the ex post facto question through statutory construction, the language of the majority opinion is promising. 

There are pending appeals in the pipeline that raise the issues previously addressed in George. A Ninth Circuit opinion striking down SORNA on due process, commerce clause or ex post facto grounds would create a circuit split; the 6^th Circuit recently joined the growing number of Circuits to upheld SORNA under Commerce Clause and Ex Post Facto challenges in United States v. Coleman, (blogged about here).

While many Circuits have addressed SORNA, few states (only Nevada in the 9^th Circuit) have implemented SORNA. (For a list of jurisdictions who have implemented regulations, see here ). SORNA regulations disregard a risk classification system based upon an offender’s propensity to reoffend. Instead, SORNA relies only upon the Tier I II and III classification system that is based solely upon the nature of the prior offense that triggered registration requirements. This also creates a challenge to the sentencing structure set forth at U.S.S.G. § 2A3.5, which increases the base offense level based on the prior offense.

Congratulations to Rebecca Pennell with the Federal Defenders of Eastern Washington in Yakima for the George win; to Rachelle Barbour, Lexi Negin and David Porter with the Sacramento FD for the Valverde victory that paved the way; and to Paresh Patel and the Greeneville and Knoxville APDs for the work to prevail on the APA violation claim in United States v. Utesch, 596 F.3d 302 (6^th Cir. 2010). 

Image of King George the II from http://en.wikipedia.org/wiki/George_II_of_Great_Britain

Diane E. Hehir
Trial Attorney
Federal Defenders of Eastern Washington and Idaho

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Judge Gleeson Explains All Regarding Unjust Implementation Of Mandatory Minimum Sentences

In the Eastern District of New York, Judge John Gleeson has been providing sensible approaches to sentencing for years, but here’s an outstanding opinion providing Attorney General Holder and all defense counsel with a thoughtful and effective policy discussion regarding the use and abuse of mandatory minimum sentences. Courtesy of Professor Berman, here’s the link to United States v. Dossie, in which Judge Gleeson begins,

“This case illustrates how mandatory minimum sentences in drug cases distort the sentencing process and mandate unjust sentences. In the substantial percentage of cases in which they apply, they produce a sentencing regime that is worse than the one the Sentencing Reform Act of 1984 was enacted to replace. They make opaque what that law was intended to make transparent. They strip criminal defendants of the due process rights we consider fundamental to our justice system. Most importantly, too many nonviolent, low-level, substance-abusing defendants like Jamel Dossie ‘lose their claim to a future’ – to borrow a phrase from Attorney General Eric H. Holder, Jr. – because lengthy mandatory prison terms sweep reasonable, innovative, and promising alternatives to incarceration off the table at sentencing.”

Judge Gleeson then provides a valuable lesson on the historical purposes of mandatory minimums, which have often been displaced by knee-jerk over-incarceration of relatively minor players. He also notes the importance of treatment based court programs that are snuffed by mandatory minimum sentences. His analysis and suggested limits on mandatory minimum discretion provide strong grounds for appreciation of those prosecutors who wield mandatory minimum power lightly, for presentation of reasons unreasonable prosecutors should modify their approaches, and for deep distrust of a sentencing system that has transferred unbridled and opaque sentencing power from the Judiciary to the Executive Branch.

Steve Sady, Chief Deputy Federal Public Defender, Portland, Oregon

Muth v. Fondren, No. 10-35223 (4-3-12) (Graber with Fisher and Rawlinson).

Petitioner traded a gun for meth ... or was it meth for a gun? It matters, because the petitioner was trying to use the "actual innocence" exception to 2255 to get relief for his 10-year consecutive sentence. Petitioner had pled to the count, and then Watson came down, the Supreme Court case that said a firearm as trade was not use. Subsequent to Watson, in Smith, the Court said that one who supplies the gun for trade did in fact "use" the weapon. Petitioner failed to file within the one year AEDPA period, and so had to seek 2241 relief and the actual innocence exception. Alas, for petitioner, the 2241 was construed as a 2255, and the conduct was not actual innocence because it was like Smith -- the petitioner brought the weapon. Although the plea agreement said he received the weapon, he himself corrected it, with counsel, at the colloquy. Interesting discussion about the need for a COA in 2255, but not 2241, and how a characterization of a petition was not to be questioned by a transferring court except for clear error.

Wentzell v. Neven, No. 10-16605 (4-2-12) (Tashima with Silverman and Garbis, D.J.).

Let's say that a petitioner subsequently wins relief in state court, and gets one count of conviction dismissed and has his judgment amended, after a prior federal habeas was dismissed as untimely. Can he file a new federal habeas, or is it barred as untimely or as a second of subsequent habeas? The 9th reasons that the petitioner's challenge was to a new judgment and therefore not a second petition. The 9th adopts the approach of the 2nd Circuit, and rejects the 5th's. Hmmmm, a circuit conflict over whether this is a new or subsequent petition. Could be cert bound. The 9th also finds error in the district court dismissing the petition sua sponte as untimely without notice to the State or petitioner.

Congratulations to AFPD Debra Bookout of the Nevada FPD (Las Vegas).

Ben-Sholom v. Ayers, No. 09-99014 (4-2-12)(McKeown with Clifton and Bybee).

The petitioner gets relief on his death sentence because of IAC. The state does not challenge this. He challenges, however, the denial of the challenge of IAC related to guilt. The state does not challenge this. The issue then becomes prejudice. The 9th holds that there was no prejudice from the IAC on the guilt determination given the evidence, and the circumstances. The petitioner was part of a robbery that led to the owner's murder. The petitioner's mental problems, horrid abusive childhood, youth, and domination by others affected the sentence, but the circumstances of the murder led to IAC being harmless.