Monday, February 23, 2015

Valuing Cell Phones: A Restitution Conundrum

Let's say that an individual obtains corporate customer account numbers for Sprint stores, goes to Sprint stores, uses the accounts to buy cell phones, then sells the phones for online resale. Perhaps not surprisingly, this happens. Joshua Ferdman did it, but got caught, convicted in federal court, sentenced to 15 months in prison, and ordered to pay $48,715.59 to Sprint for the "retail unsubsidized price" of 86 cell phones, plus shipping and investigative costs (as far as we can tell, he could not return any of the phones for an offset on his restitution order).
His appeal is all about restitution.
A few preliminary matters: (1) the government has the burden of proof on the amount of restitution; (2) that burden is a preponderance of the evidence; (3) a victim recovers no more than the value of its "actual loss;" and (4) speculation is off limits; there must be some evidentiary basis to support a restitution order.
The government thought the district court's number correct, relying on an unsworn two-page letter from a Sprint employee. That letter relied on the "retail unsubsidized price," which is an annoying way of saying the value of the phone without buying into Sprint's network (imagine someone walking into a Sprint store and simply buying a phone (and for the record, this might actually be a better option)). The reality was that the defendant paid from $149 to $199 for the phones. The letter also includes estimates of expenses Sprint incurred because of the thefts (investigative costs, including "manhours;" shipping costs for replacing phones w/in stores; that sort of stuff).
Alright, to the point: the government lost this one. The Tenth was particularly unimpressed with the unsworn letter from Sprint that did nothing more than estimate losses. So, two significant points in restitution battles: ensure the government's proof is sworn and more precise than estimates.   
Now, about the value of the phones. It seems that the Tenth expects the government to value the phones, not based on their retail price, but on lost retail sales (via proof of lost sales). At least, the government has the burden to establish that the victim lost the entirety of the retail price because of the defendant's theft (or whatever), instead of some portion of the retail price. Think of a portion of the 86 phones sold downstream to paying users of Sprint's network. In that situation, Sprint has not lost the "unsubsidized" value of the phones because the phones operate more akin to a subsidized phone (Sprint receives profits from the sale and use of the phones, allowing for a subsidized, or cheaper, retail price). Then there is also the problem of proof on whether the defendant's actions kinked the supply chain. In other words, was Sprint unable to sell phones to customers because of the defendant's actions? Apparently, the Tenth wants proof of this (from the government). So, if we understand this correctly, the sale of a different phone at a subsidized price lowers the loss on a stolen phone (so long as Sprint's inventory never lagged behind demand). The better measure, then, is "something akin to replacement or wholesale cost." After all, cell phones are fungible and "readily replaceable."
This is fascinating stuff. The decision is a must read if you find yourself in the throws of a restitution rumble involving items sold at retail prices (or not).
The New Mexico Federal Public Defender (AFPD John Butcher) cracked this code (impressively).

Thursday, February 19, 2015

The Importance of PSR Objections

From AFPD David Freund:
Many federal practitioners believe that a client’s federal presentence report is a confidential document and cannot be disclosed, except to the court, counsel, and the Bureau of Prisons (or to the same in any subsequent supervision violation or a new federal case). This is not the case. Last September, Judge Lungstrum (Kansas City, Kansas) granted a government motion to disclose a PSR to state court prosecutors. United States v Francisco Bernal-Martinez.

Francisco Bernal-Martinez was convicted of federal crimes in the District of Kansas in 2004. He was later indicted for attempted murder in state court in the Bronx. The United States filed a motion to disclose Mr. Bernal’s 2003 PSR to the Bronx District Attorney. This was purportedly for the purposes of a Sandoval hearing (a pretrial hearing to determine the extent to which a defendant will be subject to impeachment by cross examination with prior bad acts, should he testify), plea negotiations, and sentencing. Mr. Bernal lodged a pro se objection that disclosure would not be in the interests of justice, the PSR was not relevant to the state case, and the disclosure could bias the state court against him.
Judge Lungstrum used this three-part test from United States v. Iqbal, 84 F.3d 507, 510 (5th Cir. 2012): would disclosure of the PSR 1) violate the defendant’s expectation of privacy; 2) compromise confidential informants or other governmental access to information, or 3) have a chilling effect on the free flow of information that is vital to PSR-related inquiries and interviews?

Ultimately, Judge Lungstrum granted the government’s motion. Discussing Mr. Bernal’s right to privacy, Judge Lungstrum noted: 
[W]hile the dissemination of private information about a defendant, or the potential for disclosure of misleading or inaccurate information about a defendant, is arguably the most concerning from a defendant’s perspective, this factor is not a cause for concern in this case. Mr. Bernal-Martinez does not assert that any of the information contained in the PSR is incorrect and he does not assert any particular privacy interest in any of the information contained therein. Moreover, Mr. Bernal-Martinez did not assert any objections to any information in the PSR and he did not raise any objections at his sentencing hearing. Thus, despite Mr. Bernal-Martinez’s assertion that the state court judge may become biased against him upon reviewing the information contained in the PSR, that concern does not tip the balance in favor of non-disclosure in the absence of any argument that the PSR is misleading or inaccurate.

Would the result have been different had there been an unresolved objection? Who knows. However, this is a reminder that it is necessary to object to any information in the report that is unreliable or that relates to uncharged or pending offenses. While the court may decide that it need not resolve the objection (see Fed.R.Crim.P. 32(i)(3)(B)), if you don’t object to information in a PSR within the time limits of Rule 32, the opportunity is gone forever, and you cannot know if/when a failure to object may later prejudice your client.

Wednesday, February 18, 2015

Appeal Waivers Are Still a Thing

Today, in United States v. Garcia-Ramirez, the Tenth Circuit reminded us that it still intends to enforce appeal waivers, even though it recently skirted the issue in a different case. That case, United States v. Black, involved an issue of statutory interpretation, the end game centering on whether the defendant had to register as a sex offender under SORNA. That issue was a difficult one to square with the appeal waiver entered into by the parties because it turned on whether the district court had the authority to impose sex offender registration, an issue that might raise jurisdictional issues, and jurisdictional issues are almost universally excluded from the sledgehammer that is an appeal waiver. So the Tenth skirted the appeal waiver issue in Black and affirmed on the merits. The key word in that sentence is affirmed. That is why we put it in bold type.
In Garcia-Ramirez, the defendant tried to skirt an appeal waiver in light of Black, but the Court noted that it had no intent to skirt appeal waivers, then vacate sentences. Before it would vacate a sentence, it would have to reach the merits of the appeal-waiver issue. This makes sense, considering that the government "bargained for" the appeal waiver (ok, we all know how it works; the government includes an appeal waiver, and we eat it; but courts think it is part of the "bargain," so we'll play along). So, bottom line is that the Tenth has not announced some new rule that appeal waivers will be ignored on a regular basis.
The decision also reminds us of the three-part Hahn test used to enforce appeal waivers. The case is cited all the time, so a reminder of its presence is likely unnecessary, but there you go. Needless to say, you should know this decision. It is a popular one. The appeal-waiver loophole is the always murky "miscarriage of justice." In Garcia-Ramirez, however, no argument was made on the point (likely because there was no argument to be made on the point).
Appeal dismissed. The end.   

Monday, February 16, 2015

Notable Concurrence and Dissent in Recent Child Pornography Decision

The child pornography Guideline is arguably the most controversial Guideline, which is a significant achievement considering that the Guidelines Manual is 587 pages long. The Sentencing Commission has criticized it, and district courts vary downward in child pornography cases two thirds of the time (page 8; Table 3). But it is always nice to have a soundbite or two from a court of appeals (or an appeals court judge).
Enter the Sixth Circuit's decision in United States v. Walters.
Of particular note is Judge White's concurrence and, even better, Judge Merritt's dissent.
Neither is lengthy, but both are worth the read. Judge White's one-page concurrence reminds us that the Sentencing Commission itself considers many child pornography sentences excessive. Judge Merritt goes further and concludes that the 151-month term of imprisonment imposed in this case was substantively unreasonable. Actually, he cites the Eighth Amendment at the end of his dissent. If you have a child pornography case, use this concurrence and dissent, and never settle for a Guidelines range sentence. 

Sunday, February 15, 2015

Behavioral Recognition and the Fourth Amendment

We are accustomed, or desensitized, to closed circuit cameras (CCTC) in public places. Courthouses, stores, parking lots. We assume that, generally, these are used for security purposes. But that routine surveillance is expanding as it becomes more technologically advanced and financially accessible to law enforcement.

Law enforcement has now coupled CCTC  with behavioral recognition programs to monitor and analyze public behavior. That is, in combination, a computer algorithm may detect suspicious conduct by individuals (whatever that means). Instead of mere facial recognition, which requires some proximity, this behavioral recognition can, supposedly, identify certain behavior that is consistent with criminality.

Justified by law enforcement as a public safety measure, it poses an affront to the Fourth Amendment. Watching human behavior from afar, then alerting police to suspicious behavior that merits further investigation, such as a Terry stop, is a new frontier. Only within the last few years has the Supreme Court warily edged up to such established, ubiquitous technology as smart phones and GPS. Behavioral analytics falls squarely within the mosaic theory -- an aggregation of widely-collected data that crosses with the Fourth Amendment. Justice Sotomayor registered her concerns about the increasing intrusion in her concurrence in Jones. She warned that  GPS "monitoring generates a precise, comprehensive record of a person’s public movements that reflects a wealth of detail about her familial, political, professional, religious, and sexual associations." Behavioral recognition theory threatens a similar intrusion, but on a much grander scale.

The NYT describes Chicago's new 'smart' surveillance"Sophisticated new computer programs will immediately alert the police whenever anyone viewed by any of the cameras placed at buildings and other structures considered terrorist targets wanders aimlessly in circles, lingers outside a public building, pulls a car onto the shoulder of a highway, or leaves a package and walks away from it. Images of those people will be highlighted in color at the city's central monitoring station, allowing dispatchers to send police officers to the scene immediately." The obvious concern is, like other programs designed to detect terrorist activities, this will extend to any suspected criminal movement.

Behavioral Recognition: Computer Algorithms Alerting Law Enforcement to Suspicious Activity,15 U.Pitt.J.Tech. L.&Pol'y 101, by J. Darwin King, is a short but good overview of the behavioral recognition technology and the history of SCOTUS's glacier-paced approach to technological changes in context of the Fourth Amendment.

Thursday, February 12, 2015

United States v. Dunn: Some Good, Some Bad

Earlier this week, the Tenth Circuit published United States v. Dunn. This is an appeal from child pornography convictions. The decision addressed four issues. The defendant actually wins on three, but suffers a disturbing defeat on the fourth issue.

1. Special Conditions of Supervised Release
We start here because we recently posted on the topic. In fact, we advised not to raise these issues on plain error review, yet the Court vacated a condition in this case on plain error review. The condition at issue required the defendant's participation in probation's CIMP program (Computer Internet and Monitoring). The twist here is that, because the defendant was employed as a computer teacher, the condition was considered an occupational restriction, and, thus, subject to "special scrutiny." Such conditions, if imposed, must apply only "for the minimum time and to the minimum extent necessary to protect the public." District courts must make explicit findings to justify the imposition of occupational restrictions. The district court imposed a 25-year term of supervised release without the necessary findings. The Tenth sent the condition back to the district court for further findings (if reimposed on remand).

2. Restitution
The Supreme Court recently decided Paroline v. United States in an attempt to make sense of restitution in child pornography cases. Many think it failed miserably (read the dissent in Paroline). Add Congress to that list, as the Senate just passed legislation to amend the child pornography restitution statute. If this legislation becomes law, Paroline, and this decision, would likely be rendered irrelevant.
Anyway, in Dunn, the district court awarded the full amount of restitution (over $500K) to "Vicky." This is clearly error under Paroline (even the government conceded the point).  More importantly, the Court draws a line between harm caused by Vicky's abuser and harms caused by the distribution of her pictures, holding that a child pornography defendant is only responsible for the latter. So, this issue also goes back to the district court for further findings. 

3. Double Jeopardy
This one is easy. The defendant was convicted of possession of child pornography and receipt of the same child pornography. In an earlier decision, the Tenth had already declared this a double jeopardy violation. So, in this case, the government conceded error, and the Tenth vacated and remanded to the district court with instructions to vacate one of the convictions.

4. Distribution
And we end with a disturbing decision on the meaning of "distribution" in the child pornography context. Around 6 months ago, the Third Circuit published a decision in United States v. Husmann, holding that the mere act of placing child pornography in a shared computer folder, available to other users of a file sharing network, does not constitute distribution of child pornography. Instead, the government must establish that another person actually downloaded or obtained the images. That decision makes all the sense in the world. We do not distribute items simply by making them available to others (think any item with a "free" sign on it; if it is still there at the end of the day, it has not been distributed; it is still there).
Without a word on Husmann, the Tenth reaches the opposite result in this case, holding that the district court did not err in instructing the jury that distribution is nothing more than knowingly making available for sharing electronically image files that he knew depicted child pornography. The Court says that it is bound by a prior case from 2007, United States v. Shaffer, but Shaffer involved actual distribution (according to the opinion, an agent "had no problem" downloading child pornography from the defendant's computer). So Shaffer should not have controlled the outcome of this case. We hope the Tenth, sitting en banc, takes a look at this issue, and if not, the Supreme Court, because the decision, on this one point, cannot be correct.   

Wednesday, February 11, 2015

Second Chair Program & More on Issues Pending

Second Chair Program:
Applications for the 2015 Second Chair Program are due by February 15. The year-long program will begin March 1 in both Wichita and Kansas City/ Topeka. Inquiries should be sent to

The Second Chair Program is a training and mentoring program for attorneys who want to apply to be on the CJA Panel, but lack the requisite experience. The program is one year, led by the FPD office, and includes guideline workshops and an intensive six-part orientation that covers all phases of a federal criminal case. Each participant will also be assigned to a more experienced mentor attorney to shadow on selected cases. 

Participants should plan to commit from 80 to 120 hours throughout the year. Hourly compensation is provided courtesy of the Bench-Bar Committee.

Issues Pending:

We've made some improvements to our Issues Pending resource, available at our website (direct link here). The Table of Contents now hyperlinks to the body of the document, and we've added page numbers, as well as a list of recently added cases (available at the end of the document). We haven't yet added all issues pending, but we are working on it.
And that is all.