United States v. Wallace, Myron A. ( 2004 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-2687
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
MYRON A. WALLACE,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 03 CR 9—John Daniel Tinder, Judge.
____________
ARGUED DECEMBER 9, 2003—DECIDED JANUARY 23, 2004
____________
Before FLAUM, Chief Judge, and BAUER and ROVNER,
Circuit Judges.
BAUER, Circuit Judge. This decision considers when
action by an administrative agency goes far enough to be
considered a “prior specific judicial or administrative order,
injunction, decree or process” under U.S.S.G.
§ 2B1.1(b)(7)(C) to merit a two-level enhancement in a
defendant’s sentence. We considered this matter in light of
the sparse existing case law and determined that a “State-
ment of Voluntary Discontinuance” made by the defendant
at the behest of the U.S. Postal Inspection Service
(“USPIS”) does not rise to such a level. For the reasons
outlined below, we reverse the district court’s decision.
2 No. 03-2687
I. Background
Myron Wallace was not a very good business person. He
ran into trouble when he engaged in a series of transactions
via US mail to purchase telecommunications equipment.
Wallace paid for the equipment with bad checks. After his
first such transaction, Wallace was contacted by the USPIS.
He met with an inspector at the USPIS offices in May 2002
where he was told that his behavior was unlawful and
arrangements were made to settle Wallace’s debts to the
company from which he purchased the equipment. At this
time he signed a “Statement of Voluntary Discontinuance”
prepared by the USPIS, which was basically a promise by
Wallace that he would not engage in similar fraudulent
behavior in the future.1
This promise did not improve Wallace’s behavior. Less
than a year later, on March 26, 2003, Wallace pleaded
guilty to seven counts of mail fraud. During the sentencing
hearing, the district court applied a two-level enhancement
pursuant to U.S.S.G. § 2B1.1(b)(7). This section of the
Sentencing Guidelines states, “[i]f the offense involved . . .
a violation of any prior, specific judicial or administrative
order, injunction, decree, or process not addressed else-
where in the guidelines . . . increase by 2 levels.” In de-
1
The Statement provided in part,
I, Myron A. Wallace, . . . have been informed . . . [that] failing
to provide good[s], funds or services through the U.S. Mails
could constitute a violation of the Mail Fraud Statute. . . .
I hereby agree to voluntarily discontinue and permanently
cease and desist, directly or indirectly, under the name of
MWC Consulting, any variation of that name, or through any
corporate or other device, any representation, practice or
conduct in which I may have been involved, in violation of the
above described statutes.
(Br. for Appellee at app. 1.)
No. 03-2687 3
ciding to apply this enhancement, the district court judge
explained that he used a “broad reading” of this section of
the Sentencing Guidelines. (Br. for Appellant at app. 17).
Wallace now appeals, contending that the Statement he
made to the USPIS was too informal to fall under U.S.S.G.
§ 2B1.1(b)(7)(C).
II. Analysis
We review de novo the district court’s interpretation of a
sentence enhancement under the Federal Sentencing
Guidelines. United States v. Carroll, 346 F.3d 744, 747 (7th
Cir. 2003).
In this case, the applicable provision of the Sentencing
Guidelines encompasses actions by administrative agencies
(such as the USPIS) that can be classified as an “order,
injunction, decree or process.” The question is whether
Wallace’s “Statement of Voluntary Discontinuance” falls
under one of these categories; specifically, whether it is a
“process.”
There is very little case law to guide our analysis. In
United States v. Mantas, 274 F.3d 1127, 1133 (7th Cir.
2001), the sole Seventh Circuit opinion to consider this
issue, we held that “informal process” on the part of an
agency could be considered “process” for the purposes of
U.S.S.G. § 2B1.1(b)(7)(C) when it resulted in the issuance
of an “informal decree.”2 In that case we held that a meat
wholesaler selling meats from a cooler that the Illinois
Department of Agriculture had “seized” constituted a vio-
lation of a prior administrative process. Specifically, the
2
In analyzing the issue, we considered, “[t]he two circuits that
have addressed it in other contexts are somewhat split over what
constitutes official process.” Id.
4 No. 03-2687
Department of Agriculture (“USDA”) had verbally told the
wholesaler that he could not sell the meat, and told him
they had “seized” all the meat by placing a red tag on the
cooler; we described this as an informal administrative
procedure that resulted in an “informal decree” and as such
was an administrative action that was sufficient as a
process. Id. at 1129-30, 1133.
Similarly, the Second Circuit found that an agreement
arrived at after extensive negotiations did constitute
administrative process. United States v. Spencer, 129 F.3d
246 (2d Cir. 1997). In that case, the United States
Department of Transportation (“DOT”) made a businessman
submit a sworn affidavit that he would have no involvement
in an financially troubled airline prior to granting the
airline a “certificate of public convenience and necessity”;
the businessman signed the affidavit, but then did work for
the airline anyhow. The court noted that “[w]hile there was
no formal adversary ‘proceeding’ before the DOT resulting
in a formal administrative ‘order’ or ‘decree,’ there was an
extensive negotiation with the DOT, culminating in an
agreement . . . .” Id. at 252 (emphasis added).
Conversely, the Ninth Circuit found that mere adminis-
trative warnings did not rise to the level of an “administra-
tive process” in United States v. Linville, 10 F.3d 630 (9th
Cir. 1993). That case involved a woman who conned pet
owners into giving her their pets under the pretenses that
she wanted to adopt the pets, while instead, she sold them
to medical research facilities. There, the USDA sent both
warnings and a letter notifying the woman of the current
regulations prohibiting her behavior. In holding the sen-
tencing enhancement did not apply, the Ninth Circuit
explained that “the Sentencing Commission did not intend
to subject every recipient of relatively informal missives
and official notifications and warnings of violations from
administrative agencies to the extra penalties designed for
No. 03-2687 5
people with ‘aggravated criminal intent.’ ” Id. at 633. The
court went on to say that if the enhancement was war-
ranted where such warnings had been issued, it “would
compel enhancements in every criminal case where a
defendant knew or was told by someone in authority that
what she was doing was illegal, rather than limiting them
to more relatively unusual cases where someone violated a
specific court or agency order or adjudication.” Id. at 632-33.
In considering whether Wallace’s “Statement of Voluntary
Discontinuance” made to the USPIS is in fact “administra-
tive process,” we note that unlike Spencer, there were no
“extensive negotiations” prior to Wallace’s signing the
prepared statement. Nor was there official action taken by
the USPIS like the seizure of meat in Mantas. We find that
Wallace’s statement was much more informal than an ad-
ministrative “order, injunction, decree or process,” rather,
his situation is more akin to the warning letters (not
accompanied by any process) considered in Linville. Linville
warned against applying the enhancement to every situa-
tion where “a defendant knew or was told by someone in
authority that what she was doing was illegal.” Linville, 10
F.3d at 632-33. To paint a clearer picture, we see Wallace’s
situation more resembling that of a driver receiving a
warning from a police officer after being caught speeding.
In this situation, like Wallace, the driver knows she has
violated a traffic law, she knows that if she speeds in the
future she will be violating the law, and our driver will
most likely have agreed to the officer’s request that she
“slow it down” and not violate the posted speed limits in the
future. In cases of these informal warnings, the driver
cannot be doubly fined the next time she is stopped and
issued a ticket. The same is true of the USPIS actions
concerning Mr. Wallace. Without having engaged in
something more substantial than preparing a “Statement of
Voluntary Discontinuance”, we cannot hold that Wallace is
subject to the sentence enhancement in U.S.S.G.
§ 2B1.1(b)(7)(C).
6 No. 03-2687
Finally, it is worth noting that the district court placed
considerable emphasis on whether Wallace’s Statement
could be considered an “agreement” under 39 C.F.R. § 952.3.
(Br. for Appellant at app. 16.) This section of the C.F.R.
provides the Postal Service authority to use “informal”
methods to dispose of matters, namely, “agreement[s]
between the parties.” We agree with the district court that
while an agreement may be considered “informal process”
by the USPIS, we disagree that all types of “informal
process” rise to the level of “process” under U.S.S.G.
§ 2B1.1(b)(7)(C). This is an erroneous inference that the
district court judge drew from our opinion in Mantas.3
Although we found in Mantas that the informal process (the
placing of a red tag on the meat cooler) was sufficient, we
did not conclude that all actions classified as “informal
process” would be sufficient.4 These are fact patterns that
must be examined on a case-by-case basis. Based on our
analysis, Wallace’s “Statement of Voluntary Discontinu-
ance,” without any other type of procedure (such as the
extended negotiations in Spencer), does not rise to such a
level.
We reverse the judgment of the district court and remand
this case for sentencing consistent with this opinion.
3
The district court judge explained, “I believe the cases made
clear that an informal process and an informal decree are suf-
ficient to trigger application of the two-level enhancement . . . .
And I think Mantas in the Seventh Circuit makes that abundantly
clear.” Br. for Appellant at app. 16.
4
In Mantas we explained that aside from finding that violation
of an injunction merited the enhancement, “[w]e have had no
occasion to discuss what other sorts of process could trigger the
sentencing enhancement.” Mantas, 274 F.3d at 1132.
No. 03-2687 7
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—1-23-04