United States v. Reinhart ( 2023 )

Case: 22-10103 Document: 00516859898 Page: 1 Date Filed: 08/15/2023
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
____________
August 16, 2023
No. 22-10103 Lyle W. Cayce
____________ Clerk
United States of America,
Plaintiff—Appellee,
versus
Steven Anthony Reinhart,
Defendant—Appellant.
______________________________
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 2:21-CR-6-1
______________________________
Before Higginbotham, Graves, and Douglas, Circuit Judges.
Per Curiam:
Steven Anthony Reinhart (“Reinhart”) pleaded guilty, with a plea
agreement, to one count of misprision of a felony, 18 U.S.C. § 4, to wit: wire
fraud, 18 U.S.C. § 1343. Because of the substantial assistance that he
provided the government, the district court sentenced him below the
guidelines range to six months of imprisonment. The district court also
ordered Reinhart to pay $40,254,297.72 in restitution, jointly and severally
with other defendants, pursuant to the Mandatory Victims Restitution Act
(“MVRA”).
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Reinhart now appeals the district court’s restitution order. The
government moved to dismiss the appeal as barred by Reinhart’s appeal
waiver; that motion was carried with the case, and the case was fully briefed
on the merits. We hold that Reinhart’s appeal fits within an exception to his
appeal waiver and, on the merits, we VACATE the restitution order and
REMAND for the district court to conduct further fact finding and to adjust
the award, if necessary.
I.
Reagor Dykes Auto Group (“RDAG”) owned multiple automobile
dealerships in West Texas. In 2014, Reinhart was hired as RDAG’s Legal
and Compliance Director. RDAG financed its inventory through a “floor
plan,” which is the industry term used to describe a loan taken out by a
dealership to purchase its vehicle inventory. Ford Motor Credit Company
(“FMCC”) was the floor plan lender for six RDAG dealerships. FMCC
became the lender for one dealership beginning in 2008—prior to when
Reinhart’s employment began—and became the lender for the other five
dealerships in 2014 and 2015, during Reinhart’s period of employment.
RDAG was undercapitalized and had financial problems. Under the
terms of the floor plan agreement, RDAG had seven days to pay FMCC after
a consumer purchased a vehicle financed through the floor plan. At some
point, RDAG began to regularly violate the terms of the floor plan agreement
by intentionally not paying FMCC within the required seven days, which was
referred to as “selling vehicles out of trust.” To cover up the out-of-trust
sales, RDAG employees—including Reinhart—created falsified paperwork,
referred to as “dummy shucks,” prior to being audited to make it appear that
vehicles had only recently been sold and were therefore not “out of trust.”
The falsified paperwork was given to auditors hired by FMCC. Providing
falsified paperwork to the auditors created a new problem for RDAG,
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however, because the dates on the falsified paperwork represented to FMCC
that RDAG owed large payments in the days after floor plan audits—
payments that RDAG did not have the capital on hand to cover.
Reinhart helped with audits four times a year at one of RDAG’s
dealerships and witnesses told investigators that he dealt with the auditors.
Reinhart admitted that he knew RDAG was “selling vehicles out of trust”
and that he helped conceal this fraud by falsifying paperwork and providing
auditors with falsified sales dates. In addition, witnesses confirmed with
investigators that Reinhart was aware of the fraud and knew that false
information was being provided to FMCC.
Apart from selling vehicles out of trust, RDAG employees also
submitted false information to FMCC to acquire new floor plan funding. For
example, RDAG submitted information for vehicles that had already been
sold months or years before, a practice referred to as “re-flooring,” “fake
flooring,” or “dummy flooring.” At one dealership, RDAG ran out of
vehicles to re-floor, so it submitted another dealership’s inventory—which
was already floored with another company—to FMCC, a practice referred to
as “double flooring.” Reinhart did not participate in these additional floor
plan fraud schemes.
In June and July 2018, FMCC discovered the fraud. At a surprise
audit, RDAG was unable to produce approximately $40.4 million worth of
collateralized inventory. In August 2018, the RDAG dealerships filed for
bankruptcy. Criminal charges followed. As of February 2021, after limited
recovery and liquidation of assets, the total loss to FMCC was $40.2 million
across six RDAG dealerships.
After the scheme was exposed, Reinhart cooperated with the
government in the investigation and prosecution of other RDAG employees.
In return, the government agreed to allow Reinhart to plead guilty to
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misprision of wire fraud and to not prosecute him for any other offense. In
his plea agreement, Reinhart acknowledged that his sentence could include
“restitution to victims . . . which is mandatory under the law, and which the
defendant agrees may include restitution arising from all relevant conduct,
not limited to that arising from the offense of conviction alone.” Relevant
here, he also agreed to waive the right to appeal an “order of restitution . . .
in an amount to be determined by the district court,” but reserved the right
to “to bring a direct appeal of . . . a sentence exceeding the statutory
maximum punishment.”
According to Reinhart’s Presentence Report (“PSR”), RDAG’s floor
plan fraud—including sales out of trust, fake flooring, re-flooring, and double
flooring—caused a $40.2 million total loss to FMCC. Based on that loss
amount, plus Reinhart’s acceptance of responsibility and lack of criminal
history, his guidelines range was 21 to 27 months of imprisonment. The PSR
also recommended that Reinhart be ordered to pay restitution to FMCC in
the amount of the loss, jointly and severally with other RDAG defendants,
pursuant to the MVRA, 18 U.S.C. § 3663A.
Reinhart objected to the loss amount and the restitution amount. He
contended that (1) he only pleaded guilty, as reflected in his factual resume,
to participating in the out-of-trust scheme by falsifying sales paperwork and
submitting it to auditors, and he did not know, nor could have foreseen, that
other RDAG employees were engaging in fake flooring, re-flooring, and
double flooring, and (2) to the extent any of the losses occurred before he
began working at RDAG in March 2014, they were not caused by him.
Therefore, he argued, he should only be held accountable for losses caused
by “selling vehicles out of trust” after March 2014 and not for the full array
of floor plan-related fraud.
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The district court overruled Reinhart’s objections and adopted the
PSR’s loss amount and restitution recommendation. The district court then
sentenced Reinhart below the guidelines range to six months of
imprisonment and ordered him to pay $40,254,297.72 in restitution to
FMCC, jointly and severally with his RDAG co-defendants, pursuant to the
MVRA. Reinhart filed a timely notice of appeal. 1
II.
Before proceeding to the merits, we must first consider Reinhart’s
appeal waiver. We review de novo whether an appeal waiver bars an appeal.
United States v. Baymon, 312 F.3d 725, 727 (5th Cir. 2002). “The right to
appeal a conviction and sentence is a statutory right, not a constitutional one,
and a defendant may waive it as part of a plea agreement.” Id. “To
determine whether an appeal of a sentence is barred by an appeal waiver,”
we analyze “(1) whether the waiver was knowing and voluntary and
(2) whether the waiver applies to the circumstances at hand, based on the
plain language of the agreement.” United States v. Bond, 414 F.3d 542, 544
(5th Cir. 2005) (citations omitted). “We must interpret the plea agreement
like a contract, in accord with what the parties intended.” Id. at 545. “In
determining whether a waiver applies, this court employs ordinary principles
of contract interpretation, construing waivers narrowly and against the
Government.” United States v. Keele, 755 F.3d 752, 754 (5th Cir. 2014)
(citing United States v. Palmer, 456 F.3d 484, 488 (5th Cir. 2006)). Reinhart
does not dispute that his waiver was knowing and voluntary but asserts that
his challenge fits within the exception to his appeal waiver reserving the right
_____________________
1
Reinhart was released September 24, 2022. In his opening brief, he abandoned
his challenge to the loss amount insofar as it impacted his guidelines range as moot, while
continuing to challenge his restitution order.
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to appeal a sentence exceeding the statutory maximum punishment. We
agree.
“A defendant who has waived his right to appeal may still challenge a
restitution order that exceeds what is authorized by statute.” See United
States v. Chem. & Metal Indus., Inc., 677 F.3d 750, 752 (5th Cir. 2012)
(“C&MI”) (no bar to challenge where defendant’s appeal waiver expressly
reserved the right to appeal a sentence in excess of the statutory maximum);
United States v. Kim, 988 F.3d 803, 809 (5th Cir. 2021) (no bar to challenge
where defendant’s appeal waiver did not expressly reserve his right to appeal
a sentence in excess of the statutory maximum), cert. denied, 142 S. Ct. 225
(2021).” A district court can order restitution only “when authorized by
statute.” United States v. Penn, 969 F.3d 450, 458 (5th Cir. 2020) (quoting
United States v. Espinoza, 677 F.3d 730, 732 (5th Cir. 2012)). “[T]he term
‘statutory maximum’ in an appeal waiver means ‘the upper limit of
punishment that Congress has legislatively specified for violations of a
statute.’” Bond, 414 F.3d at 546 (quoting United States v. Cortez, 413 F.3d
502, 503 (5th Cir. 2005)). We, therefore, begin our analysis by considering
the relevant statute.
In this case, the district court awarded restitution pursuant to the
MVRA, which requires restitution for certain offenses—including offenses
against property committed by fraud or deceit, like Reinhart’s—“in which
an identifiable victim or victims has suffered a physical injury or pecuniary
loss.” 18 U.S.C. §§ 3663A(a)(1), (c)(1)(A)(ii), (c)(1)(B). The MVRA
defines a “victim” as “a person directly and proximately harmed as a result
of the commission of an offense for which restitution may be ordered.” Id.
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§ 3663A(a)(2). Thus, the statute “limits restitution to the actual loss directly
and proximately caused by the defendant’s offense of conviction.” United
States v. Sharma, 703 F.3d 318, 323 (5th Cir. 2012); see also id. (“An award of
restitution cannot compensate a victim for losses caused by conduct not
charged in the indictment or specified in a guilty plea, or for losses caused by
conduct that falls outside the temporal scope of the acts of conviction.”
(citations omitted)). In other words, the “actual loss directly and
proximately caused by the defendant’s offense of conviction,” id., is “the
upper limit of punishment that Congress has legislatively specified” in the
MVRA. Bond, 414 F.3d at 546 (quotation and citation omitted).
Reinhart’s claim that the district court ordered restitution for losses
that were not caused by his “offense of conviction” is an argument that the
district court awarded restitution in excess of that authorized by the MVRA
and is therefore not barred by his appeal waiver. Sharma, 703 F.3d at 323; see
also United States v. Inman, 411 F.3d 591, 595 (5th Cir. 2005) (“A defendant
sentenced under the [MVRA] is only responsible for paying restitution for
the conduct underlying the offense for which he was convicted.”).
The government counters that Reinhart waived his right to appeal the
district court’s exercise of discretion in ordering restitution. According to
the government, the MVRA “vests the district court with discretion to
determine the value of any property lost as a result of the offense,” see 18
U.S.C. § 3663A(b)(1)(B), and Reinhart, in his plea agreement, waived his
right to appeal an “order of restitution . . . in an amount to be determined by
the district court”; therefore, in this case “the ‘upper level of punishment’
under the MVRA is the lost ‘value’ as determined by the district court.” This
argument relies on a misunderstanding of the MVRA.
The MVRA grants district courts discretion in calculating the value of
a victim’s lost property to ensure that the victim is properly compensated for
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actual loss. See 18 U.S.C. § 3663A(b)(1)(B). But the district court does not
have authority to order restitution at all unless the loss was “directly and
proximately caused by the defendant’s offense of conviction.” Sharma, 703
F.3d at 323; see 18 U.S.C. § 3663A(a)(1)-(2) (authorizing “restitution to the
victim of the offense,” meaning “a person directly and proximately harmed as
a result of the commission of an offense” (emphasis added)); see also § 3664(e)
(“The burden of demonstrating the amount of the loss sustained by a victim
as a result of the offense shall be on the attorney for the Government.”
(emphasis added)). Here, Reinhart is not challenging the district court’s
valuation of the loss but its authority to award restitution for that loss in the
first place.
Additionally, the government contends that Reinhart agreed to
“expand [his] restitution obligations” because Paragraph 3 of his plea
agreement stated that his sentence could include “restitution to victims . . .
which is mandatory under the law, and which the defendant agrees may
include restitution arising from all relevant conduct, not limited to that
arising from the offense of conviction alone.” See § 3663(a)(3) (providing
that “[t]he court may also order restitution in any criminal case to the extent
agreed to by the parties in a plea agreement”).
For support, the government cites United States v. Meredith, 52 F.4th
984 (5th Cir. 2022), but that case is distinguishable for at least two reasons.
First, as the court in Meredith noted, restitution in that case was not awarded
pursuant to the MVRA because the defendant was not convicted of an
MVRA-covered offense. Id. at 987 n.1. Second, and perhaps more
importantly, the defendant in Meredith contended that the statutory-
maximum exception “authorizes an appeal whenever the defendant thinks
the district court erred in its restitution calculation.” Id. at 987. We rejected
this argument and enforced the appeal wavier because “the statutory-
maximum carveout authorizes an appeal only when the district court exceeds
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‘the upper limit of punishment that Congress has legislatively specified for
violations of a statute’—not when the sentencing judge commits any error
under the sentencing statute.” Id. (quoting Bond, 414 F.3d at 546). Unlike
the defendant in Meredith, Reinhart is challenging the district court’s
restitution order as exceeding that upper limit, rather than asserting a mere
error in restitution calculation within that limit. Id.In sum, Reinhart’s argument that the district court awarded
restitution for losses caused by conduct not encompassed by his offense of
conviction or by conduct specified in his guilty plea, and for losses that pre-
date his involvement with RDAG, is a statutory-maximum challenge.
III.
Turning to the merits, typically “[w]e review the quantum of an award
of restitution for abuse of discretion.” Sharma, 703 F.3d at 322. “A trial
court abuses its discretion when its ruling is based on an erroneous view of
the law or a clearly erroneous assessment of the evidence.” United States v.
Crawley, 533 F.3d 349, 358 (5th Cir. 2008) (quotations marks and citation
omitted). “A district court’s fact-finding as to the amount of restitution
under the MVRA is reviewed for clear error.” United States v. Beydoun, 469
F.3d 102, 107 (5th Cir. 2006). “There is no clear error if the district court’s
finding is plausible in light of the record as a whole.” United States v. Mathew,
916 F.3d 510, 516 (5th Cir. 2019) (quoting United States v. Harris, 597 F.3d
242, 250 (5th Cir. 2010)). However, “[w]e review de novo whether a sentence
exceeded the statutory maximum.” C&MI, 677 F.3d at 752.
As recited above, the MVRA “limits restitution to the actual loss
directly and proximately caused by the defendant’s offense of conviction.”
Sharma, 703 F.3d at 323. “An award of restitution cannot compensate a
victim for losses caused by conduct not charged in the indictment or specified
in a guilty plea, or for losses caused by conduct that falls outside the temporal
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scope of the acts of conviction,” and “every dollar must be supported by
record evidence.” Id. (citation omitted). “A person is directly harmed by
the commission of a[n] . . . offense where that offense is a but-for cause of the
harm.” Mathew, 916 F.3d at 519 (quoting In re Fisher, 640 F.3d 645, 648 (5th
Cir. 2011)) (alteration in original). “A person is proximately harmed when
the harm is a reasonably foreseeable consequence of the criminal conduct.”
Id. (quoting In re Fisher, 640 F.3d at 648).
On appeal, Reinhart asserts that the restitution award exceeds the
statutory maximum because the district court did not determine whether the
award included amounts for losses that occurred before he began working for
RDAG. We agree. “An award of restitution cannot compensate a victim . . .
for losses caused by conduct that falls outside the temporal scope of the acts
of conviction,” and “every dollar must be supported by record evidence.”
Sharma, 703 F.3d at 323; see also 18 U.S.C. § 3664(e) (“The burden of
demonstrating the amount of the loss sustained by a victim as a result of the
offense shall be on the attorney for the Government.”). Those exacting
standards were not satisfied on this record.
FMCC became the floor plan lender for one RDAG dealership in 2008
and for another five dealerships in 2014 and 2015. Reinhart began working
for RDAG in March 2014. But it is not clear when the fraud at RDAG began
or when Reinhart began participating in the fraud. The PSR is silent as to
both questions, while the information and Reinhart’s factual resume merely
recite that the offense began “on or about a date unknown.” The PSR
included a total purported loss amount for each dealership, but without
specifying when the conduct causing the losses occurred. The PSR then
subtracted approximately $5 million from the loss amount to account for
asset recovery and liquidation sales to come to a “total loss” of $40.2 million,
but without specifying what losses were recouped. Thus, we cannot discern
from the record evidence if the restitution order impermissibly included
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amounts for losses that were caused by conduct that occurred prior to
Reinhart’s offense, the amount of any such losses, and whether such losses
were recouped or not.
Pursuant either to the MVRA’s limitations or United States
Sentencing Guidelines’ (U.S.S.G.) principles of relevant conduct, Reinhart
cannot be ordered to pay restitution for losses caused by the conduct of others
that occurred prior to the commencement of his offense. Therefore, we must
vacate and remand for the district court to conduct further fact finding on the
temporal scope issue and to adjust the restitution award accordingly, if
necessary. 2
Reinhart also asserts that the restitution award exceeds the statutory
maximum because it includes losses caused by conduct outside the scope of
his guilty plea and offense of conviction, for losses that he did not cause and
could not have foreseen. The district court noted that there were “multiple
schema” at play (including sales out of trust, dummy shucks, re-flooring, fake
flooring, and double flooring) under the broader umbrella of floor plan fraud
but determined that “the concepts intersect and intertwine” and that the
plea agreement and the Sentencing Guidelines’ principles of “relevant
conduct” applicable to “jointly-undertaken criminal activity” supported a
restitution award for the full amount.
According to Reinhart, his offense of conviction was limited to
concealment of selling of vehicles out of trust and did not include
concealment of the additional floor plan fraud schemes. Therefore, he argues
that he should only be held responsible for losses caused by concealing the
_____________________
2
Even applying the broader concept of “relevant conduct” contained in the
Sentencing Guidelines, a defendant in a “jointly undertaken criminal activity” is not liable
for the conduct of others that occurred prior to when he joined in the activity. U.S.S.G. §
1B1.3 cmt. n.3(B).
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sale of vehicles out of trust. The government maintains that Reinhart’s
offense directly and proximately caused the full floor plan loss. Further,
according to the government, Reinhart admitted in his factual resume that he
participated in a broader “scheme” to defraud, not limited to selling vehicles
out of trust, and agreed in his plea to pay restitution for all “relevant
conduct,” which includes the full scope of floor plan fraud.
We disagree with the government’s reading of the plea agreement and
factual resume. Reinhart pleaded guilty to one count, contained in an
information, of misprision of a felony—wire fraud—in violation of 18 U.S.C.
§ 4. The information stated that Reinhart, “having knowledge of the actual
commission of a felony . . . wire fraud, a violation of 18 U.S.C. § 1343, did
conceal the same by providing auditors with false sale dates on buyer orders.”
The information did not otherwise define what constituted the underlying
“wire fraud.”
In his factual resume, Reinhart admitted that he participated with
others in a wire-fraud “scheme” to deceive FMCC and unlawfully enrich
RDAG, himself, and others. The factual resume, however, also repeatedly
described the underlying wire fraud scheme as “selling vehicles out of trust.”
In pertinent part, the factual resume stated that “selling vehicles out of trust
constituted a violation of the wire fraud statute, 18 U.S.C. § 1343”; that
“Reinhart knew that RDAG was selling vehicles out of trust”; that “[t]o
conceal the fact that RDAG was selling vehicles out of trust, in violation of
18 U.S.C. § 1343, Reinhart provided auditors . . . with false sales date on
buyer orders to make FMCC and its auditors believes that such vehicles were
not being sold out of trust”; that “[s]uch active concealment constituted a
violation of the misprision statute, 18 U.S.C. § 4”; and that “[n]ot only did
Reinhart have knowledge of the wire fraud described above (i.e. selling
vehicles out of trust), but he also failed to notify an authority as soon as
possible of the fact that RDAG was selling vehicles out of trust.”
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Aside from selling vehicles out of trust, the information and factual
resume do not refer to any other fraudulent floor plan scheme, yet the district
court appeared to give the factual resume and plea agreement the same
expansive reading as the government and concluded that Reinhart was a
participant in a jointly undertaken criminal activity constituting the entire
floor plan fraud. That was error. See United States v. Evbuomwan, 992 F.2d
70, 74 (5th Cir. 1993) (explaining that “mere knowledge that criminal activity
is taking place is not enough” for a finding of jointly undertaken criminal
activity; instead, “the government must establish that the defendant agreed
to jointly undertake criminal activities with the third person, and that the
particular crime was within the scope of that agreement”). As the
commentary to the Sentencing Guidelines explain:
[T]he scope of the “jointly undertaken criminal activity” is not
necessarily the same as the scope of the entire conspiracy, and
hence relevant conduct is not necessarily the same for every
participant. In order to determine the defendant’s
accountability for the conduct of others . . . the court must first
determine the scope of the criminal activity the particular
defendant agreed to jointly undertake (i.e., the scope of the
specific conduct and objectives embraced by the defendant’s
agreement). In doing so, the court may consider any explicit
agreement or implicit agreement fairly inferred from the
conduct of the defendant and others. Accordingly, the
accountability of the defendant for the acts of others is limited
by the scope of his or her agreement to jointly undertake the
particular criminal activity. Acts of others that were not within
the scope of the defendant’s agreement, even if those acts were
known or reasonably foreseeable to the defendant, are not
relevant conduct[.]
U.S.S.G. § 1B1.3 cmt. n.3(B).
Here, as it was described in the factual resume, Reinhart agreed to
jointly undertake the concealment of sales out of trust by providing false sales
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dates to auditors; therefore, the subsequent floor plan fraud carried out by
other RDAG employees (i.e. fake flooring, re-flooring, and double flooring)
is not relevant conduct because those schema do not fall within the scope of
concealment of sales out of trust. The upshot is that the factual resume and
the plea agreement’s reference to “relevant conduct” cannot support a
restitution order for the full amount of the floor plan fraud. Rather, pursuant
to the MVRA, Reinhart can only be held responsible for the “actual loss
directly and proximately caused by [his] offense of conviction.” Sharma, 703
F.3d at 323. We leave it to the district court on remand to make any additional
factual findings necessary to determine the amount of restitution statutorily
authorized by the MVRA and to enter a new restitution order in that amount.
* * *
For the foregoing reasons, we VACATE the restitution order and
REMAND for recalculation of restitution consistent with this opinion.
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