United States v. Havens, Patricia A. ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-2956
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
PATRICIA A. HAVENS,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 1:03CR00159-001—Larry J. McKinney, Chief Judge.
____________
ARGUED JANUARY 12, 2005—DECIDED SEPTEMBER 12, 2005
____________
Before FLAUM, Chief Judge, and EASTERBROOK and WOOD,
Circuit Judges.
WOOD, Circuit Judge. Patricia A. Havens pleaded guilty
to various offenses relating to identity theft. She was
sentenced to 12 months in prison and ordered to pay
$30,000 in restitution to the person whose identifying
information she stole. Havens does not challenge her prison
sentence; rather, her appeal is limited to the order of
restitution, which, she argues, imposed obligations on her
that were not authorized by the Mandatory Victim Restitu-
tion Act of 1996 (MVRA), 18 U.S.C. § 3663A. We conclude
that the order indeed went too far, and we therefore vacate
it and remand to the district court for further proceedings.
2 No. 04-2956
I
On November 18, 1998, Havens applied (using her
maiden name, Brown) to AmerUS Home Equity for a
mortgage loan in the amount of $144,000, which she
planned to use to refinance the outstanding mortgage on
her Indianapolis home. Concerned that the application
would be rejected because of her poor credit rating, Havens
fraudulently filled out the application using the date of
birth, social security number, and various credit card
accounts of a more creditworthy Patricia Brown, a certi-
fied public accountant (CPA) with an office in nearby
Carmel, Indiana. Havens had obtained this information
from credit reports to which she had access in her capacity
as a real estate broker. In support of her application,
Havens also submitted two false payroll checks made
payable to Patricia Brown, showing the stolen social
security number. Relying on the information Havens
provided, AmerUS approved the application and executed
a loan in the name of Patricia A. Brown, under the social
security number assigned to Brown, but secured by Ha-
vens’s property.
The fraud went undetected until 1999, when Havens
fell behind on the mortgage payments and AmerUS con-
tacted Brown. At first Brown believed that the problem was
the result of a mistake on the part of AmerUS, but in short
order, more creditors began to contact her about other lines
of credit that she had not opened. After looking into the
problem, Brown discovered that in addition to the AmerUS
mortgage loan, Havens had also obtained a second mort-
gage loan and opened a credit card account using Brown’s
identifying information. The records indicated that both
these accounts were also delinquent. The new accounts that
Havens had opened were not the only way in which she
damaged Brown’s credit history; in addition, parts of
Havens’s earlier credit history, including a bankruptcy,
various civil judgments entered against her, and other
No. 04-2956 3
delinquent accounts, had migrated over to Brown’s credit
reports. As a result, Brown’s once positive credit rating had
suffered greatly. According to Brown, a poor credit rating is
particularly harmful to someone in her profession, as it
calls into question her integrity and reliability as a CPA.
Upon uncovering Havens’s fraud, Brown notified the
relevant authorities and then sued Havens in Indiana state
court for damages under Ind. Code § 34-24-3-1,which allows
a person who suffered pecuniary losses as a result of theft
or fraud to bring an action against the person causing the
loss and to recover treble damages, reasonable attorney’s
fees, and compensation for lost time. Although Brown was
not required to repay any of the debts incurred by Havens’s
use of her identifying information, she requested damages
consisting of the amount of credit stolen, attorney’s fees
incurred in the litigation, and the value of the time she
spent investigating the fraud and correcting her credit
history. The trial court awarded Brown $30,000 in damages
and $14,000 in attorney’s fees, and the Indiana Court of
Appeals affirmed. See Brown, C.P.A. v. Brown, 776 N.E.2d
394 (Ind. App. 2002). Brown also requested and was
granted a court order directing the credit agencies to correct
her credit reports and restore her credit rating.
On October 9, 2003, a federal grand jury indicted Havens
on two counts of wire fraud, in violation of 18 U.S.C. § 1343,
three counts of using a false social security number, in
violation of 42 U.S.C. § 408(a)(7)(B), and one count of fraud
in connection with access devices, in violation of 18 U.S.C.
§ 1029(a)(2) and (c)(1), in connection with the AmerUS
mortgage loan. Havens entered into a plea agreement with
the government under which she pleaded guilty to all six
counts in the indictment. In the agreement, the parties
stipulated that the U.S. Sentencing Guidelines called for a
base offense level of 12 and a two-level reduction for
acceptance of responsibility, but they agreed that the court
would determine Havens’s sentence and that the stipula-
4 No. 04-2956
tions served only as a recommendation. In addition, the
government reserved the right to request an upward
departure as well as an order of restitution.
At the sentencing phase, the government requested an
upward departure from the Guideline range, arguing in
reliance on U.S.S.G. § 2B1.1 Application Note 15(A)(vii)(i)
that Havens’s conduct caused substantial harm to Brown’s
credit record and Brown incurred substantial inconvenience
in repairing the damage. The Presentence Investigation
Report recommended restitution to Brown in the amount of
$42,099.70, based on the amount outstanding from the civil
judgment award obtained in state court. Havens objected to
both the request for upward departure and amount of
restitution, arguing that Brown suffered no monetary losses
because she was not required to pay back the debts and
that the restitution amount could not mirror the state court
judgment as it reflected losses not covered under the
MVRA.
The district court denied the government’s motion to
depart upward and sentenced Havens to 12 months in
prison and three years of supervised release. It rejected the
attorney’s fee portion of the civil judgment as restitution,
but it ordered Havens to pay the principal sum of $30,000
to Brown. On appeal, Havens challenges this amount.
II
The MVRA requires a court to order a defendant to make
full restitution to the victim of an offense involving fraud or
deceit. 18 U.S.C. § 3663A(a)(1) and (c)(1)(A)(ii). A victim
under the Act is “a person directly and proximately harmed
as a result of the commission of an offense.” § 3663A(a)(2);
see also United States v. Donaby, 349 F.3d 1046, 1052 (7th
Cir. 2003) (citing United States v. Randle, 324 F.3d 550, 556
(7th Cir. 2003) (recognizing that the MVRA authorizes
restitution to a victim directly harmed by the offender’s
No. 04-2956 5
specific conduct that is either the basis of the offense of
conviction or an element of a scheme)).
In the case of an offense resulting in damage to property,
the MVRA requires the defendant to return the property to
the victim or if that is not possible, to pay the victim an
amount equal to the loss of value of the property. See
§ 3663A(b)(1). We have noted that “[t]his measure of re-
lief is less generous than common law damages, since it
does not extend to consequences beyond the diminution of
the value of the property stolen or damaged.” United States
v. Scott, 405 F.3d 615, 618 (7th Cir. 2005). This is because
criminal restitution refers only “to the restoration of
something that the defendant had taken from the plain-
tiff, including a profit.” Id. at 619 (citations omitted).
Havens concedes that Brown qualifies as a victim under
the Act. There is no question that Brown, as is the case
with all identity theft victims, was harmed by the unautho-
rized use of her identifying information. The issue instead
is whether the amount of the restitution order was proper.
Havens argues that the court should not have relied on the
$30,000 state civil judgment award because it was based on
a theory of “stolen credit” and did not reflect the actual
monetary losses suffered by Brown. She also contends that
no amount of restitution should be imposed because Brown
was not required to pay off the debts Havens had acquired
in her name and thus she suffered no actual losses. Accord-
ing to Havens, whatever losses Brown did incur in pursuing
her civil lawsuit are “simply too nebulous” to be considered
losses under the MVRA.
We review the court’s calculation of the amount of
restitution for an abuse of discretion. See United States
v. Sensmeier, 361 F.3d 982, 988 (7th Cir. 2004). We will
disturb a restitution order only if the district court relied
upon inappropriate factors when it exercised its discre-
tion or failed to use any discretion at all. Id. Although the
6 No. 04-2956
district court is not statutorily required to make specific
findings of fact, “if the record does not sufficiently sup-
port its conclusions or clarify its reasoning, then we ask
that the court provides us with that information, including
its specific findings of fact, to facilitate our review.” United
States v. Menza, 137 F.3d 533, 538 (7th Cir. 1998).
In calculating the amount of restitution, the district court
adopted in its entirety the amount of damages awarded by
the Indiana state court. A civil judgment award by itself,
however, is insufficient to support an order of restitution
because some damages and costs recoverable in a civil
action, such as treble damages, consequential damages and
attorneys’ fees spent in pursuing litigation against the
wrongdoer, do not qualify as “losses” under the MVRA. See
United States v. Shepard, 269 F.3d 884, 887 (7th Cir. 2001).
(Attorneys’ fees in that situation are not regarded as
“damages” at all, see Scott, 405 F.3d at 620, because under
the American rule the decision to award fees is considered
a procedural one, not a remedial one. Id.) Instead, a court
may include only those portions of the award that reflect
the losses actually caused by the defendant’s offense. See
United States v. Rhodes, 330 F.3d 949, 953 (7th Cir. 2003);
United States v. Seward, 272 F.3d 831, 839 (7th Cir. 2001)
(holding that restitution is based on the amount of actual
loss caused by the offense and excludes consequential or
incidental damages).
Here, we cannot tell from the face of the district court’s
order which losses reflected in the state court judgment are
recoverable, and which were not. We know from the com-
plaint that Brown sought $575,301 in damages under Ind.
Code § 34-24-3-1: $558,324 represented three times the
amount of credit Havens had obtained through Brown’s
identifying information; $1,500 accounted for the value
of time Brown spent in pursing the litigation; $15,274
represented Brown’s attorneys’ fees; and the remainder
reflected court costs. We also know that the state court
No. 04-2956 7
awarded Brown $30,000 in damages, but we do not know
the origin of this amount. This lack of information prevents
us from conducting a meaningful review of the order of
restitution and requires us to remand the case to the
district court for further proceedings. See United States
v. George, 403 F.3d 470, 473-74 (7th Cir. 2005); Menza,
137 F.3d at 538.
On remand, the court will need to determine the diminu-
tion in value of Brown’s property caused by Havens’s
conduct. Although Brown was not required to pay the debts
Havens incurred using her name and credit, this does not
mean that Brown did not suffer losses recoverable under
the MVRA. Brown takes the position that she is entitled to
reimbursement for all the time she spent in this endeavor,
but in our view that goes too far. To the extent that she
spent time that otherwise would have been compensated,
perhaps because she had to miss work and forego hourly
compensation, or because she had to turn down professional
clients to whom she could have provided services if she was
not occupied with her credit restoration activities, her time
may be compensated. Time spent for which the opportunity
cost was zero, however, cannot be the subject of compensa-
tion, because the loss to the victim is zero in that case. Fees
paid to counsel or other experts for dealing with the banks
and credit agencies in the effort to correct her credit history
and repair the damage to her credit rating are also properly
included in a restitution order. See Scott, 405 F.3d at 619(holding that the expense of an audit conducted to deter-
mine how much was stolen is recoverable); Rhodes, 330
F.3d at 953 (holding that a victim’s repayment to its
customers of the amount stolen by its employee is recover-
able); Menza, 137 F.3d at 539 (finding that clean-up costs
required by the defendants’ conduct are recoverable). The
costs associated with her lawsuit to recover damages under
Ind. Code § 34-24-3-1, however, are not recoverable, because
they do not reflect the losses she suffered as a direct result
of Havens’s conduct.
8 No. 04-2956
III
For the foregoing reasons, we VACATE the order of restitu-
tion, and REMAND the case for proceedings consistent with
this opinion.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—9-12-05