United States v. Susan Pioch ( 2021 )

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 21a0162p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
┐
UNITED STATES OF AMERICA,
│
Plaintiff-Appellee, │
> No. 19-3919
│
v. │
│
SUSAN M. PIOCH, │
Defendant-Appellant. │
┘
Appeal from the United States District Court for the Northern District of Ohio at Toledo.
No. 3:14-cr-00403-1—James G. Carr, District Judge.
Decided and Filed: July 19, 2021
Before: SILER, MOORE, and DONALD, Circuit Judges.
_________________
COUNSEL
ON BRIEF: John F. Potts, LAW OFFICE OF JOHN F. POTTS, Toledo, Ohio, for Appellant.
Suzana K. Koch, UNITED STATES ATTORNEY’S OFFICE, Cleveland, Ohio, for Appellee.
_________________
OPINION
_________________
KAREN NELSON MOORE, Circuit Judge. This case requires us to interpret the
serpentine language of 28 U.S.C. § 3011(a), which entitles the United States to recover a
surcharge from Susan Pioch of 10% of . . . something. The Government wants to apply the 10%
surcharge to the two-million-plus dollars of debt that Pioch owes on a judgment in a criminal
case. Pioch insists that the Government can apply the 10% surcharge to just $367,681.47, which
No. 19-3919 United States v. Pioch Page 2
is the amount involved in a garnishment of two of her financial accounts in partial satisfaction of
the judgment’s outstanding balance.
We conclude that the Government can apply the 10% surcharge to the two-million-plus-
dollars outstanding on the judgment. First, under § 3011(a), when the Government initiates an
action or proceeding under Federal Debt Collection Procedures Act subchapter B or C to recover
debt owed to the United States, the United States is entitled to recover a surcharge of 10% of the
outstanding debt. Second, the debt must be paid off before the United States may collect the
§ 3011(a) surcharge. Finally, the § 3011(a) surcharge is an amount to be added to, not subtracted
from, the judgment. We thus VACATE and REMAND for further proceedings consistent with
this opinion.
I. BACKGROUND
Susan Pioch and two codefendants were convicted of crimes arising from their scheme to
defraud the multimillion-dollar estate of an elderly widower. See United States v. Mallory, 902
F.3d 584, 588–89 (6th Cir. 2018). A third person was convicted and sentenced in Arizona. See
id. at 590.
The district court sentenced Pioch to 111 months of imprisonment and imposed on Pioch
a special assessment of $3,700 and restitution of $2,037,783.30. R. 380 (Judgment at 3, 7) (Page
ID #6116, 6120). Pioch shares joint-and-several liability with her codefendants for
$1,990,342.76 of the restitution, which is to be paid to James McLaughlin, the sole living heir of
the defrauded victim, pursuant to the Mandatory Victims Restitution Act of 1996 (MVRA), Pub.
L. No. 104-132, Title II, Subtitle A, § 206(a), 110 Stat. 1227, 1235 (codified at 18 U.S.C.
§ 3664(i)). R. 380 (Judgment at 7–9) (Page ID #6120–22) (citing 18 U.S.C. § 3664(i)); R. 426
(4/19/18 Response at 2) (Page ID #6424). Pioch personally owes the remaining $47,440.54 in
restitution to the Internal Revenue Service (IRS). R. 380 (Judgment at 8–9) (Page ID #6121–22).
Thus, Pioch is liable for a total of $2,041,483.30 for the assessment and restitution. The district
court ordered Pioch to liquidate eleven investment accounts and annuities totaling $467,188.50
in partial payment of her restitution obligations. Id. at 10 (Page ID #6123).
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The Government applied for writs to garnish $367,681.48 from two of Pioch’s accounts
that were not part of the original list of eleven accounts. In these applications, the Government
stated that $2,091.48 of the debt had been paid off but did not clarify whether the $2,091.48 was
applied towards the assessment, the restitution due to the IRS, or the restitution due to
McLaughlin. Invoking the Federal Debt Collection Procedures Act of 1990 (FDCPA), Pub. L.
No. 101-647, Title XXXVI, Subtitle A, § 3611, 104 Stat. 4933, 4937–38 (codified at 28 U.S.C.
§ 3011(a)), the Government requested a 10% surcharge amounting to $204,148.33 (i.e., 10% of
the original balance of $2,041,483.30). R. 413 (Application #1 at 1–2 & n.1) (Page ID #6350–
51); R. 415 (Application #2 at 1–2 & n.1) (Page ID #6363–64); R. 423 (Proposed Order #1 at 1–
2) (Page ID #6417–18); R. 424 (Proposed Order #2 at 1–2) (Page ID #6419–20). Over Pioch’s
objections, the district court granted the applications for writ of garnishment and the surcharge
request. See United States v. Pioch, No. 3:14CR403, 2019 WL 4305773, at *1 (N.D. Ohio Sept.
11, 2019).
Pioch timely appealed. She argues that the surcharge should be calculated based on the
“debt” that the United States “actually recover[s] through enforcement of a collection remedy”
(i.e., 10% of the $367,681.48 subject to garnishment) and not the total debt resulting from her
crimes (i.e., 10% of the $2,041,483.30 judgment). Appellant’s Br. at 12. The Government has
slightly shifted gears on appeal. The Government no longer seeks a 10% surcharge applied to
the $2,041,483.30 judgment. Rather, the Government explains, the surcharge applies to the debt
outstanding when the garnishment applications were filed. See Appellee’s Br. at 4 n.1. The
Government thus seeks a surcharge of $203,939.18, which is 10% of the $2,039,391.82 that
Pioch owed when the garnishment applications were filed. See id. at 4–5 & nn.1, 2.
II. ANALYSIS
We review de novo the district court’s interpretation of the FDCPA. See United States v.
Shafer, 573 F.3d 267, 272 (6th Cir. 2009).
We begin with § 3011(a)’s text. See id. Section 3011(a), found in FDCPA subchapter A,
provides that “[i]n an action or proceeding under subchapter B or C, and subject to subsection
(b), the United States is entitled to recover a surcharge of 10 percent of the amount of the debt in
No. 19-3919 United States v. Pioch Page 4
connection with the recovery of the debt, to cover the cost of processing and handling the
litigation and enforcement under this chapter of the claim for such debt.” 28 U.S.C. § 3011(a).
FDCPA subchapter B lists prejudgment remedies; subchapter C lists postjudgment
remedies. See id. §§ 3101–3105; 3201–3206. Thus, “[t]he plain language of § 3011 makes it
applicable only to prejudgment or postjudgment procedures.” United States v. Sackett, 114 F.3d
1050, 1053 (10th Cir. 1997). Garnishment is listed as both a prejudgment and a postjudgment
remedy. 28 U.S.C. §§ 3104; 3205. Because the Government applied postjudgment to garnish
two of Pioch’s accounts, § 3011(a) applies here. Section 3011(b) supplies two exceptions to
§ 3011(a)’s rule, neither of which is relevant to this case.
According to the next phrase of § 3011(a), the United States is “entitled” to recover a
10% surcharge of “the amount of the debt in connection with the recovery of the debt.” In
relevant part, 28 U.S.C. § 3002(3)(B) defines “debt” as “an amount that is owing to the United
States on account of . . . [an] assessment, . . . restitution, [or] recovery of a cost incurred by the
United States, or other source of indebtedness to the United States, . . .”1 Of course, restitution in
a criminal case is often owed to a victim who is not the United States. Here, for example, Pioch
jointly and severally owes $1,990,342.76 to McLaughlin. Notwithstanding, the FDCPA deems
the outstanding balance on a judgment of restitution arising in a criminal case to be “an amount
that is owing to the United States” for § 3002(3)(B) purposes. See 28 U.S.C. § 3003(b)(2) (“This
chapter shall not be construed to curtail or limit the right of the United States under any other
Federal law or any State law . . . to collect any fine, penalty, assessment, restitution, or forfeiture
arising in a criminal case.” (emphasis added)). Returning to § 3002(3)(B)’s definition of “debt,”
the plain and ordinary meaning of “owing” is “due to be paid.” See Owing, MERRIAM-WEBSTER
(defining “owing” as “due to be paid” and supplying “outstanding,” “overdue,” “owed,”
“payable,” “unpaid,” and “unsettled” as synonyms). Tying everything together: a “debt” can
constitute the amount due to be paid because of an assessment, an order of restitution (including
restitution owed to individuals arising out of criminal cases), or another source of indebtedness
to the United States.
1The § 3011(a) surcharge itself does not constitute “debt.” See 28 U.S.C. § 3002(3).
No. 19-3919 United States v. Pioch Page 5
Confusion arises from the confounding repetition of “debt” in § 3011’s phrase “amount
of the debt in connection with the recovery of the debt.” Pioch urges that “[a]ll words [in
§ 3011(a)] are to be given effect and none are to be ignored.” Appellant’s Br. at 8. She argues
that “in connection with the recovery of the debt” modifies “amount of the debt” and urges us
that “a surcharge may be recovered from that amount of the debt that is recovered through
litigation and enforcement of a collection claim under the FDCPA.” Id. at 12. So, Pioch insists,
“the 10 percent surcharge is to be computed with reference to the amount of the debt that is
actually recovered through enforcement of a collection remedy such as a claim for
garnishments.” Id. Put simply, Pioch conceives of the first two uses of “debt” in § 3011(a) as
referring to distinct concepts; the first “debt” is the amount that the Government recovers—via
garnishment, for example—and the second “debt” is the amount due on the judgment.
The Government disagrees. To the Government, “in connection with the recovery of the
debt” is a trigger, not a modifier; the phrase authorizes the United States to recover the
surcharge. See Appellee’s Br. at 11. Put another way: the Government believes that § 3011’s
first two uses of “debt” allude to the same debt—the outstanding balance due on the judgment.
The second “debt” is just a “redundanc[y]” that is “common in statutory drafting.” Appellee’s
Br. at 10 (quoting Barton v. Barr, — U.S. —, 140 S. Ct. 1442, 1453 (2020)).
Pioch’s reading runs into an insurmountable textual hurdle. Enforcement actions, like
garnishments, are not “debt.” FDCPA subchapter C lists garnishment as a postjudgment remedy
that is used to satisfy a debt. See 28 U.S.C. § 3205; see also id. § 3011(a) (“In an action or
proceeding under subchapter B or C . . .). That coheres with the ordinary and legal
understanding of garnishments. See Garnishment, MERRIAM-WEBSTER (defining garnishment as
“a legal summons or warning concerning the attachment of property to satisfy a debt” (emphasis
added)); Garnishment, BLACK’S LAW DICTIONARY (defining garnishment as “[a] judicial
proceeding in which a creditor (or potential creditor) asks the court to order a third party who is
indebted to or is bailee for the debtor to turn over to the creditor any of the debtor’s property
(such as wages or bank accounts) held by that third party” (emphasis added)); cf. 15 U.S.C.
§ 1672(c) (defining “garnishment” as “any legal or equitable procedure through which the
earnings of any individual are required to be withheld for payment of any debt” in the context of
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wage garnishments (emphases added)); 31 U.S.C. § 3720D(a) (“[T]he head of an . . . agency that
administers a program that gives rise to a delinquent nontax debt owed to the United States by an
individual may . . . garnish the disposable pay of the individual to collect the amount owed, . . .”
(emphasis added)); FED. R. CIV. P. 64(a), (b) (listing garnishment as a “remedy” “to secure
satisfaction of the potential judgment” (emphases added)). So even if Pioch is correct that “in
connection with the recovery of the debt” modifies “amount of debt” in § 3011, a garnishment
action cannot be the “amount of debt” to which the United States is entitled to apply its
surcharge.
We thus agree with the Government. “[I]n connection with the recovery of the debt”
triggers the “recover[y] [of] a surcharge of 10 percent of the amount of the debt.” Thus, when
the Government initiates an action or proceeding under FDCPA subchapter B or C to recover
debt owed to the United States, the United States is entitled to recover a surcharge of 10% of the
outstanding debt.2
We emphasize two features of § 3011(a) that are applicable here. First, the Government
may collect the 10% surcharge only after Pioch has fully paid the assessment, the restitution
owed to McLaughlin, and the restitution owed to the IRS, in that order. Second, the “surcharge”
is an amount to be added to, and not subtracted from, the judgment.
In this case, the judgment states: “Payments shall be applied in the following order:
(1) assessment, (2) restitution principal, . . . (9) costs, including cost of prosecution and court
costs.” R. 380 (Judgment at 8) (Page ID #6121). The § 3011(a) surcharge is levied to cover the
cost of prosecution. See § 3011(a) (“to cover the cost of processing and handling the litigation
and enforcement . . . .”). Per the judgment alone, the surcharge is separate from and must be
2Other courts of appeals have acknowledged without deciding that § 3011(a) entitles the United States to a
10% surcharge on the debt outstanding to the United States and not 10% of the debt actually recovered by the
Government (through a garnishment, for example). See, e.g., Sears, Roebuck & Co. v. U.S. Postal Serv., 844 F.3d
260, 264–65, 268 (D.C. Cir. 2016); Bd. of Governors of Fed. Rsrv. Sys. v. Pharaon, 169 F.3d 110, 113–14 (2d Cir.
1999); Consol. Edison Co. of N.Y. v. Ashcroft, 286 F.3d 600, 606 (D.C. Cir. 2002); United States v. Peoples
Household Furnishings, Inc., 75 F.3d 252, 254 n.3 (6th Cir. 1996); United States v. Alphagraphics Franchising,
Inc., 973 F.2d 429, 430–31 (5th Cir. 1992); United States v. Goyette, 446 F. App’x 718, 721 (5th Cir. 2011); United
States v. Pugh, 75 F. App’x 546, 547 (8th Cir. 2003); United States v. Zharn, 8 F. App’x 465, 466 (6th Cir. 2001)
(order).
No. 19-3919 United States v. Pioch Page 7
paid after the full payment of the assessment and restitution. The MVRA, moreover, requires
that McLaughlin receive his restitution before the IRS does. 18 U.S.C. § 3664(i) (“[T]he court
shall ensure that all other victims receive full restitution before the United States receives any
restitution.”). The plain and ordinary meaning of “surcharge,” moreover, is “to charge an extra
fee”; “an extra fare”; and “an additional tax, cost, or impost.” Surcharge, MERRIAM-WEBSTER
(emphases added); see also Surcharge, BLACK’S LAW DICTIONARY (defining “surcharge” as
“[a]n additional tax, charge, or cost”); cf. 8 U.S.C. § 1714 (“[T]he Secretary of State is
authorized to charge surcharges related to consular services in support of enhanced border
security that are in addition to the passport and immigrant visa fees . . . .” (emphasis added)).
The insertion of “surcharge” into § 3011(a) indicates to us that Congress wanted the Government
to collect a fee on top of the “amount that is owing” to the United States.
Reality buoys our analysis of the language of the judgment in the present case, the
MVRA, and § 3011(a)’s plain text. “[I]t is rare that defendants are able to fully pay the entire
restitution amount owed.” U.S. DEP’T OF JUST., RESTITUTION (Feb. 5, 2020),
https://www.justice.gov/usao-ak/restitution. “Many defendants have already spent the money
that they stole, and will not have sufficient assets to repay their victims.” Id. “If and when the
defendant pays, [a victim of crime] most likely will receive a number of small payments over a
long period of time.” Id. In the mine-run restitution scenario, it would be unjust and unfair to
allow the Government to collect the § 3011(a) surcharge ahead of the victim of a crime or to
subtract the surcharge from the amount that the victim is owed.
III. CONCLUSION
We conclude by reiterating our three holdings. First, we hold that when the Government
initiates an action or proceeding under FDCPA subchapter B or C to recover debt owed to the
United States, the United States is entitled to recover a surcharge of 10% of the outstanding debt
under § 3011(a). Second, we hold that the debt (here, the assessment and restitution) must be
satisfied before the United States may collect the § 3011(a) surcharge. Finally, the § 3011(a)
surcharge is an amount to be added to, and not subtracted from, the judgment.
No. 19-3919 United States v. Pioch Page 8
Because a modification of the surcharge amount is in order, see Appellee’s Br. at 4–5 &
nn.1, 2, we VACATE and REMAND so that the district court can calculate the amount that
Pioch owed in assessments and restitution when the Government filed the applications for writs
of garnishment. The Government may collect 10% of that amount as a surcharge only after the
$3,700 assessment, the $1,990,342.76 of restitution owed to McLaughlin, and the $47,440.54 of
restitution owed to the IRS are paid in full in that order. And the 10% surcharge must be added
to, and not subtracted from, the outstanding debt owed by Pioch.