United States v. Gregory Fair , 699 F.3d 508 ( 2012 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 19, 2012 Decided November 9, 2012
No. 09-3120
UNITED STATES OF AMERICA,
APPELLEE
v.
GREGORY WILLIAM FAIR,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 1:09-cr-00089-1)
Beverly G. Dyer, Assistant Federal Public Defender, argued
the cause for appellant. With her on the briefs was A.J. Kramer,
Federal Public Defender. Neil H. Jaffee, Assistant Federal
Public Defender, entered an appearance.
Christopher S. Merriam, Assistant Deputy Chief, U.S.
Department of Justice, argued the cause for appellee. With him
on the brief was Lanny A. Breuer, Assistant Attorney General.
Elizabeth Trosman, Assistant U.S. Attorney, entered an
appearance.
Before: ROGERS and KAVANAUGH, Circuit Judges, and
SILBERMAN, Senior Circuit Judge.
2
Opinion for the Court by Circuit Judge ROGERS.
ROGERS, Circuit Judge: Gregory Fair pled guilty to
copyright infringement, in violation of 17 U.S.C. § 506(a) and
18 U.S.C. § 2319, and mail fraud, in violation of 18 U.S.C.
§ 1341. Pursuant to the Mandatory Victim Restitution Act
(“MVRA”), 18 U.S.C. § 3663A, the district court ordered him
to pay restitution to Adobe Systems, Inc. in an amount
equivalent to the revenue he received from his sales of the
pirated products. On appeal he contends that the district court
abused its discretion because the government failed to offer
evidence of Adobe Systems’ actual loss, instead offering
evidence only of his gain. Because the government did not meet
its burden to present evidence from which the district court
could determine Adobe Systems’ actual loss as a result of the
pirated sales, we vacate the restitution order.
I.
According to the stipulated facts in the plea agreement,
Fair’s criminal scheme involved high-volume sales of pirated
Adobe Systems’ software on eBay. He sold copies of outdated
versions of popular Adobe products, such as Adobe Photoshop
and PageMaker. Along with the pirated software, he included
numerical codes that allowed buyers to update their software to
the most recent version at a reduced cost from Adobe Systems.
Fair’s scheme thus represented a much cheaper route to an up-
to-date version of the software. For example, a customer could
first buy a pirated copy of outdated PageMaker software and an
upgrade code from Fair for around $125 and then pay around
$200 to Adobe Systems to upgrade to the most current version.
The total price paid, around $325, would be less than half of the
retail price of the authentic up-to-date Adobe program
(approximately $700).
3
Fair’s infringement scheme lasted from February 2001 to
September 2007, after which time an undercover investigation
by the United States Postal Inspection Service, based on
information from Adobe Systems about unauthorized sales,
identified his sales activity. According to records from PayPal,
the program used for completing eBay transactions, Fair had
received, and he admitted receiving, approximately $1.4 million
from his sales of pirated software on eBay. The plea agreement
also stated, for purposes of calculating the offense levels under
the U.S. Sentencing Guidelines, that “the infringement amount”
was greater than $400,000 but less than $1 million. Plea
Agreement at 2, 3 (Apr. 16, 2009). It also acknowledged that
the MVRA mandated restitution, citing 18 U.S.C. § 3663A, but
did not specify an agreed-to amount.
Prior to sentencing, the government provided the probation
office with “a spreadsheet summarizing records in the
government’s possession relating to [Fair’]s specific sales.”
Gov’t’s Mem. in Aid of Sent. at 6 & Attach. A (Jun. 29, 2009).
The spreadsheet showed over 7,000 sales with total sales
revenue of $767,465.99, which the government advanced as “a
reasonable calculation of the restitution.” Id. at 6. Fair objected
and initially suggested restitution of $455,000, the amount of
currency he withdrew from PayPal accounts associated with the
fraudulent transactions. See Def.’s Mem. in Aid of Sent. at 3 &
n.1 (June 26, 2009). He subsequently submitted that (1)
restitution under the MVRA must take the form of “actual loss”
to the victim; (2) “actual loss cannot be equated to ‘intended
loss’ or to gain by the defendant”; and (3) the government had
offered “no proof . . . of any actual loss by [the victim,] Adobe
Systems.” Def.’s Supp. Sent. Mem. at 1–4 (Sept. 22, 2009). He
further suggested that his piracy might in fact have benefitted
Adobe Systems by increasing consumers’ awareness and use of
its products. See id. at 3.
4
The government rejected Fair’s suggestion that Adobe
Systems benefitted from his sales or had any policy of
acquiescing to piracy, and argued that “[Fair]’s pirated works
cheat[ed] Adobe [Systems] out of sales of full[-cost] versions of
its product at the much higher price point.” Gov’t’s Supp. Mem.
in Aid of Sent. at 5 (Oct. 13, 2009). Although objecting to
Fair’s suggestion that his sales revenues should be offset by his
costs, the government did not squarely address Fair’s argument
that the victim’s actual loss, not the defendant’s gain, should
provide the basis for the restitution amount under the MVRA.
Rather, the government merely noted that it was “not relying
upon a restitution figure tied to the much higher retail price of
the legitimate Adobe software, but instead is using the actual
sales records and dollar amount sold by [Fair].” Id. at 8–9. In
its view, “[t]hough admittedly more difficult to quantify” than
lost sales, Fair additionally “inflicted other considerable harm to
Adobe,” such as damage to Adobe’s “good name.” Id. at 9.
At the sentencing hearing on October 22, 2009, defense
counsel emphasized that the government had failed to prove the
amount of Adobe Systems’ actual loss and had not raised
sufficient reasons why Adobe Systems could not prove the
amount of its loss, but instead relied on how much money Fair
earned from the infringing sales. Counsel pointed out that
although “several hundred thousand dollars worth of cash and
cars were seized from [Fair], all of which were . . . undoubtedly
proceeds of this [scheme],” and “Adobe [Systems] applied to get
them,” the Postal Inspection Service only released
approximately $24,000, “decid[ing] that Adobe [Systems] hasn’t
shown that they deserve [the rest of] that money.” Tr. Oct. 22,
2009 at 21. Counsel argued that “[i]f Adobe Systems does not
come . . . with some data to indicate . . . that they had sales
interrupted that amounted to more than the sales that they clearly
got, based upon [Fair’s] activity, then . . . they should not be
awarded restitution.” Id. at 21–22. Government counsel
5
responded that Adobe Systems had provided the spreadsheet but
did not have the information Fair sought and “never did a study
that showed piracy benefitted them.” Id. at 24. Otherwise,
government counsel referred to screen shots of Fair’s eBay
listings showing he was advertising his products as genuine, as
well as the $455,000 tied to PayPal withdrawals. Defense
counsel, in reply, described how Adobe Systems distinguished
between persons buying from Fair and those who bought
legitimate software and chose as “a corporate strategy” to permit
Fair’s customers to purchase upgrades but to give no tech
support to Fair’s software. Id. at 26.
The district court sentenced Fair to 41 months’
imprisonment and three years’ supervised release, and ordered
him to pay to Adobe Systems restitution of $743,098.99, an
amount representing the total sales listed on the spreadsheet
($767,465.99) less the forfeited funds turned over to Adobe
Systems by the Postal Inspection Service ($24,367.00). Looking
for “hard proof from the government,” the district court
reasoned that “[i]t’s undisputed that [Fair]’s revenue from the
sales of pirated Adobe products was at least $767,000,” and that
“if anyone held the right to collect revenue from the sale of these
products, it was Adobe [Systems],” and so it followed that
“since the sales did occur and revenue was generated, and the
right to the revenue was held by Adobe [Systems] and not by
[Fair], that Adobe [Systems] has the right to be restored to the
revenue that it lost [in] its right to collect on actual sales that
were made.” Tr. Oct. 22, 2009 at 27–28. Fair appeals the
restitution order, and our review of a restitution order is for
abuse of discretion. United States v. Bryson, 485 F.3d 1205,
1208 (D.C. Cir. 2007); cf. United States v. Leonzo, 50 F.3d
1086, 1088 (D.C. Cir. 1995).
6
II.
Federal courts do not have inherent authority to order
restitution. See United States v. Papagno, 639 F.3d 1093, 1096
(D.C. Cir. 2011). A product of the victims’ rights movement,
see id., the MVRA, 18 U.S.C. § 3663A, is unlike other
restitution statutes under which the award of restitution is
discretionary, see Papagno, 639 F.3d at 1096–97. The MVRA
applies only to certain types of crimes, including Title 18
property offenses “in which an identifiable victim . . . has
suffered a physical injury or pecuniary loss.” 18 U.S.C.
§ 3663A(c)(1). It provides that the restitution order “shall
require” that the defendant either return the property or
reimburse the victim for his or her “loss” — i.e., the value of the
property offset by the value of any part of the property that was
returned. Id. § 3663A(b)(1). The MVRA is to be enforced
pursuant to section 3664, id. at § 3663A(d), which requires
courts to order the defendant to pay “restitution to each victim
in the full amount of each victim’s losses,” id. § 3664(f)(1)(A).
The purpose of the MVRA, then, is “essentially
compensatory: to restore a victim, to the extent money can do
so, to the position [the victim] occupied before sustaining
injury.” United States v. Boccagna, 450 F.3d 107, 115 (2d Cir.
2006) (citations omitted). Its authorization is accordingly
limited to the actual, provable loss suffered by the victim and
caused by the offense conduct. See United States v. Zangari,
677 F.3d 86, 91–92 (2d Cir. 2012); United States v. Arledge, 553
F.3d 881, 898–99 (5th Cir. 2008); United States v. Chalupnik,
514 F.3d 748, 754–55 (8th Cir. 2008) (citing United States v.
Petruk, 484 F.3d 1035, 1038 (8th Cir. 2007)); United States v.
Hudson, 483 F.3d 707, 710–11 (10th Cir. 2007); Boccagna, 450
F.3d 107, 115–17. Awarding restitution in excess of the
victim’s actual loss would be punitive in nature and thus fall
outside the scope of the MVRA. See Chalupnik, 514 F.3d at
7
754; Hudson, 483 F.3d at 710. Because the MVRA does not
authorize restitution in excess of the amount of the victim’s
losses, see, e.g., Boccagna, 450 F.3d at 117, United States v.
Beydoun, 469 F.3d 102, 107 (5th Cir. 2006), it is distinguishable
from restitution in the civil law context, where restitution
denotes “the law of nonconsensual and nonbargained benefits.”
RESTATEMENT (THIRD) OF RESTITUTION & UNJUST ENRICHMENT
§ 1(d) (2011).1
The MVRA places the burden on the government to prove
the victim’s loss by a preponderance of the evidence. 18 U.S.C.
§ 3664(e). Our sister circuits have required that the district
court, in determining “the full amount of each victim’s losses,”
id. § 3664(f)(1)(A), articulate the specific factual findings
underlying its restitution order in order to enable appellate
review. United States v. Singletary, 649 F.3d 1212, 1222 (11th
Cir. 2011); United States v. George, 403 F.3d 470, 473 (7th Cir.
2005).
1
The RESTATEMENT (THIRD) OF RESTITUTION & UNJUST
ENRICHMENT explains:
Another context in which the word ‘restitution’ means
something closer to ‘damages’ is a product of statutes
authorizing compensation to victims as a part of criminal
sentencing. It is a natural use of the language to speak of
requiring a criminal to ‘make restitution’; the problem is that
the liability imposed in such cases is not based on unjust
enrichment but on compensation for harm. To the extent that
this aspect of criminal sanctions has a basis in civil
obligations, it is found in tort rather than restitution.
Id. at § 1(e)(2).
8
A.
The circuit courts of appeals are in general agreement that
the defendant’s gain is not an appropriate measure of the
victim’s actual loss in MVRA calculations. See Zangari, 677
F.3d at 92–93 (2d Cir.); Arledge, 553 F.3d at 899 (5th Cir.);
United States v. Gallant, 537 F.3d 1202, 1247 (10th Cir. 2008);
Chalupnik, 514 F.3d at 754 (8th Cir.); United States v.
Galloway, 509 F.3d 1246, 1253 (10th Cir. 2007); cf. United
States v. Kuo, 620 F.3d 1158, 1164–65 (9th Cir. 2010); United
States v. Harvey, 532 F.3d 326, 341 (4th Cir. 2008); United
States v. Badaracco, 954 F.2d 928, 942–43 (3d Cir. 1992). That
said, the Second Circuit has acknowledged that “there may be
cases where there is a direct correlation between gain and loss,
such that the defendant’s gain can act as a measure of — as
opposed to a substitute for — the victim’s loss.” Zangari, 677
F.3d at 93 (emphasis in original) (citation omitted). That court
was careful to emphasize, however, that some approximation of
actual loss is needed in order to assess whether the defendant’s
gain serves as a reasonable estimate of the loss. See id. at
93–94. Otherwise, resort to the complexity exception, 18
U.S.C. § 3663A(c)(3)(B), or additional evidentiary proceedings,
id. at § 3664(d),2 is the appropriate course. See Zangari, 677
2
The MVRA provides that a district court may decline to
order restitution for a qualifying property offense if it finds, “from
facts on the record,” that:
(A) the number of identifiable victims is so large as to
make restitution impracticable; or
(B) determining complex issues of fact related to the
cause or amount of the victim’s losses would
complicate or prolong the sentencing process to a
degree that the need to provide restitution to any
victim is outweighed by the burden on the sentencing
process.
9
F.3d at 93.
The government correctly notes that the Seventh Circuit in
United States v. Chay, 281 F.3d 682 (7th Cir. 2002), affirmed a
restitution award based on the gross proceeds of the defendant’s
fraudulent sales, i.e., the defendant’s gain, id. at 687. In Chay,
however, the defendant raised a different challenge to the
restitution award, namely that the restitution amount should be
reduced by the costs of his piracy, id. at 686, and thus the
Seventh Circuit had no occasion to address the gain-versus-loss
issue now before this court. See id. at 686–87 & n.2. It
subsequently did in George, 403 F.3d 470, and held, in line with
the other circuits, that “[r]estitution must be based on the
victim’s loss rather than the offender’s gain.” Id. at 474(citations omitted). Somewhat similarly the Second Circuit in
United States v. Milstein, 481 F.3d 132, 137 & n.3 (2d Cir.
2007), affirmed a restitution order based on a victim’s lost sales
where the defendant did not challenge the sales-profit distinction
on appeal.
Because the plain text of the MVRA’s authorization, 18
U.S.C. § 3663A(a)(1), reflects Congress’ intent to compensate
victims for the loss caused by the defendant’s criminal conduct,
see id. § 3664(f)(1)(A), we join the circuit courts of appeals and
hold that in ordering restitution pursuant to the MVRA the
district court may not substitute a defendant’s ill-gotten gains for
the victim’s actual, provable loss. Victims of crime may achieve
disgorgement of profits and ill-gotten gains through other
statutory and civil-recovery mechanisms. See, e.g., Kuo, 620
F.3d at 1164, 1166; Chalupnik, 514 F.3d at 754. For instance,
Id. § 3663A(c)(3). Or the district court may follow a less drastic path
and attempt to alleviate the complexity by requiring additional
documentation, hearing testimony, or referring the issue to a
magistrate judge or special master. Id. § 3664(d).
10
the actual-damages provision for copyright infringement under
Title 17 provides that “[t]he copyright owner is entitled to
recover the actual damages suffered by him or her as a result of
the infringement, and any profits of the infringer that are
attributable to the infringement and are not taken into account in
computing the actual damages.” 17 U.S.C. § 504(b) (emphasis
added).
B.
In cases involving copyright infringement and fraudulent
sales, the victim’s actual loss typically equates to the profit the
victim lost on the sales that were diverted from the victim as a
result of the defendant’s infringing sales. See, e.g., Chalupnik,
514 F.3d at 755; Hudson, 483 F.3d at 710 & n.1; Beydoun, 469
F.3d at 107–08. Under this lost-profits on diverted-sales theory,
the government must offer sufficient evidence to establish both
the profit margin per sale and the number of sales lost. If the
record does not demonstrate that the counterfeit goods ever
reached the market, see, e.g., Beydoun, 469 F.3d at 107–08;
United States v. Johnson, 790 F. Supp. 2d 945, 946 (E.D. Wis.
2011); United States v. Dove, 585 F. Supp. 2d 865, 872 (W.D.
Va. 2008), or that their introduction to the market in fact
“thwarted” actual sales of the victim’s product, see, e.g.,
Chalupnik, 514 F.3d at 755; Hudson, 483 F.3d at 710; Dove, 585
F. Supp. 2d at 872, courts have held that no actual loss can be
shown and restitution therefore is inappropriate. In this regard,
the actual loss to the displaced (authentic) seller is the profit lost
from the displaced sales — not the retail value of the goods that
would have been sold. Hudson, 483 F.3d at 710 n.1; Dove, 585
F. Supp. 2d at 872; cf. Chalupnik, 514 F.3d at 755. The gross
proceeds that the defendant collects from infringing sales are
similarly an inappropriate gauge of the victim’s lost profits.
In ordering Fair to pay restitution to Adobe Systems
equivalent to his sales revenue, the district court abused its
11
discretion because the government failed to present evidence
from which the district court could either determine Adobe
Systems’ actual loss or find that Fair’s gain was a reasonable
measure of that loss. The MVRA demands that restitution be
awarded only for the victim’s actual, provable loss, see 18
U.S.C. § 3663A(a)(2), (b)(1); id. § 3664(e), (f)(1)(a). Yet the
government offered no evidence of either the number of sales
that Adobe Systems likely lost as a result of Fair’s scheme or the
profit that Adobe Systems would have made on any such
diverted sales. The record contains only a spreadsheet tallying
Fair’s eBay sales and unsubstantiated, generalized assertions of
government counsel regarding Adobe Systems’ lost sales. See,
e.g., Gov’t’s Mem. in Aid of Sent. at 6–9 & Attach. A (June 29,
2009); Gov’t’s Supp. Mem. in Aid of Sent. at 5, 8–9 (Oct. 13,
2009). There thus was no evidentiary basis on which the district
court could find that had Fair’s customers not purchased pirated
Adobe software from him at a greatly reduced price, all or any
portion of them would have purchased full-priced versions from
Adobe Systems. Much as the Tenth Circuit observed in Hudson,
483 F.3d at 710, “we are very skeptical of the implicit
suggestion that” customers’ purchase of a certain number of
copies of low-priced counterfeit software “proves that [those
customers] would have agreed to purchase the same number of
copies from [the legitimate seller]” for many times more.
Nor was there an evidentiary basis on which the district
court could find that Fair’s revenues represented profits that
Adobe Systems would have otherwise gained. Adobe Systems’
victim impact statement cited losses stemming from all software
piracy in support of requesting the maximum sentence, whereas
restitution under the MVRA is limited to the victim’s losses
from the defendant’s offense conduct. Consequently, the district
court’s order that Fair pay Adobe Systems restitution in the
amount of his unlawful sales revenue (minus the $24,367 it had
already received from Fair’s seized property) failed to conform
12
to the MVRA. As Fair states: “The restitution here was purely
speculative. Thus, even if the government was correct that
[Fair’s] conduct ‘deprives the rights[’] owner of potential sales,’
. . . it did not introduce evidence specifically identifying, or even
estimating, sales lost to Adobe [Systems].” Appellant’s Br. at
17.
The government maintains that because Fair “created any
potential uncertainty in calculating pecuniary harm” by selling
outdated counterfeit software, “[he] — not his victims — bears
the risk of any uncertainty that his misconduct causes at the time
of quantifying harm.” Appellee’s Br. at 26. It also maintains
that the lost-profits rationale “makes no sense in the present
context” because Adobe Systems no longer sells the versions of
the software that Fair sold. These arguments are unpersuasive.
As an initial matter, under the MVRA the government, not the
defendant, carries the burden of proving the amount of the
victim’s loss. 18 U.S.C. § 3664(e). The cases on which the
government relies are inapposite civil law cases, such as
Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 265 (1946)
and Story Parchment Co. v. Paterson Parchment Paper Co., 282
U.S. 555, 562 (1931), which did not involve restitution awards
and in which the amount of damages was not statutorily limited
to the victim’s actual, provable loss. Nor is this a case where a
partial shift in the burden would be appropriate, where the
defendant “deliberately destroyed” evidence relevant to the
restitution calculation, see Kuo, 620 F.3d at 1167, or where the
defendant is in a much better position than the government to
ascertain the particular facts at issue, see United States v.
Archer, 671 F.3d 149, 173 (2d Cir. 2011).
Furthermore, to the extent uncertainty exists as to Adobe
Systems’ profit margins on outdated products, the government
fails to address why using profit margins from the company’s
current products would not represent a more accurate estimate
13
of actual loss than Fair’s gross sales proceeds. At sentencing,
the government counsel acknowledged that a market exists of
“people who are likely to buy older but genuine product[s].” Tr.
Oct. 22, 2009 at 22–23. Government counsel’s statement that
Adobe Systems had not conducted a study to determine the
impact of infringement suggests a method that might have been
used to provide the district court with relevant evidence to
determine the amount of Adobe Systems’ actual loss.
Conceivably, as discussed during oral argument, Adobe Systems
might have been able to survey Fair’s customers to determine
how many would likely have purchased full-cost updated
versions of those Adobe products. See Oral Argument Tape
14:27–15:09. Additionally, the government offers no
explanation of why Fair’s customers’ purchases of upgrades
from Adobe Systems would not represent gains to the company
or, for that matter, how the ability of Fair’s customers to
purchase upgrades would assist the district court in evaluating
how many customers would have purchased new Adobe
products at full price absent Fair’s piracy.
To the extent the government defends the use of gross
proceeds as “consistent with the calculation of loss under the
Sentencing Guidelines,” Appellee’s Br. at 15, it ignores the
different approaches in the Guidelines and the MVRA.
Essentially, the government blurs the line between the
“infringement amount” calculated under Sentencing Guidelines
§ 2B5.3 in criminal copyright cases, which is derived by
multiplying the retail value of the infringed or infringing items
by the quantity of infringing items, and the restitution amount
calculated under the MVRA, which must reflect the actual,
provable loss suffered by the victim. See Tr. Oct. 22, 2009 at
32–33; Appellee’s Br. 15–17. The two calculations are distinct
“given the different methods of calculation and different
purposes of the calculation[s]” even if they may equate in some
instances. United States v. Yeung, 672 F.3d 594, 604 (9th Cir.
14
2012) (citations omitted); see also United States v. Huff, 609
F.3d 1240, 1247–48 (11th Cir. 2010); Singletary, 649 F.3d at
1220; Dove, 585 F. Supp. 2d at 869. And “[u]nlike loss under
the Guidelines, the MVRA requires proof of actual loss and does
not allow alternative metrics, such as gain,” Gallant, 537 F.3d
at 1247 (citation omitted). Even under the Guidelines provision
that permits a defendant’s gain to be used as an alternative
measure of loss for certain property offenses (not including
criminal copyright infringement), the gain that resulted from the
offense may be used “only if there is a loss but it reasonably
cannot be determined.” U.S. SENTENCING GUIDELINES MANUAL
§ 2B1.1 cmt. 3(B) (2011). The MVRA offers a different
alternative. See 18 U.S.C. § 3663A(c)(3), supra note 2.
Finally, the government’s argument — that requiring proof
of lost profits “would reward defendants by imposing on victims
the difficult task of quantifying each lost sale resulting from
their criminal conduct,” Appellee’s Br. at 18 — collapses under
the plain text of the MVRA, which places the burden on the
government, not the victim, to prove actual loss by a
preponderance of the evidence. 18 U.S.C. § 3664(e). Moreover,
the MVRA permits victims to recoup any necessary
expenditures made during participation in the prosecution and
investigation. Id. § 3663A(b)(4); see generally Papagno, 639
F.3d at 1097–1100. And in the event the actual-loss calculation
is in fact too complex to permit a timely calculation of
reasonable restitution, the MVRA envisions the appropriate path
for a district court is to hold additional proceedings or to decline
to order restitution at all, not to issue an order unsupported by
the evidence. See 18 U.S.C. §§ 3663A(c)(3), 3664(d), supra
note 2.
The abuse-of-discretion standard may be generous, see
Kickapoo Tribe v. Babbitt, 43 F.3d 1491, 1497 (D.C. Cir. 1995)
(citing Maurice Rosenberg, Judicial Discretion of the Trial
15
Court: Viewed from Above, 22 SYRACUSE L. REV. 635 (1971)),
but it is not one that will countenance the clear legal and factual
error present here.
C.
The remaining question is the scope of a remand, if any.
The government seeks another opportunity to offer new evidence
of Adobe Systems’ actual loss while Fair seeks vacation of the
restitution order for lack of record evidence to determine or
estimate Adobe Systems’ actual loss. Any remand, Fair
alternatively suggests, should require resentencing based on the
existing record.
Although decided under the Sentencing Guidelines as
opposed to the MVRA, our decision in Leonzo, 50 F.3d 1086, is
on point. There, after concluding that the district court lacked
sufficient evidence to support its Guidelines loss calculation, the
court reversed and remanded for resentencing. Leonzo, 50 F.3d
at 1087. The Guidelines’ calculation hinged on the size of the
loss taken on a fraudulently obtained loan on a particular
mortgaged property, and at sentencing the government offered
evidence only of the average loss to a portfolio including the
property in question, not evidence of the size of any loss the
victim suffered on that particular property. Id. at 1088. This
court restricted the remand proceedings to the existing record,
precluding the government from introducing new evidence in
support of its claim of loss. Id. The court explained that “[n]o
special circumstances justified, or even explained, the
government’s failure to sustain [its] burdens [of production and
persuasion].” Id.; see also Archer, 671 F.3d at 168–69, 174.
Because the legal and factual positions regarding the
requirements of the MVRA were fully aired by the parties here
in the district court, we are unpersuaded that the government
should be permitted “a second bite at the apple” absent special
16
circumstances. Leonzo, 50 F.3d at 1088; see also Singletary,
649 F.3d at 1222.
In United States v. Whren, 111 F.3d 956 (D.C. Cir. 1997),
the court applied the same rationale to hold that on remand for
resentencing a defendant may not “raise for the first time a
challenge to his sentence that is unrelated to the reason for the
remand . . . unless his newly-raised objection to the sentence is
based upon an error so plain that the district court or the court of
appeals should have raised it for him.” Id. at 957. The court
elaborated that “upon a resentencing occasioned by a remand,
unless the court of appeals expressly directs otherwise, the
district court may consider only such new arguments or new
facts as are made newly relevant by the court of appeals’
decision — whether by the reasoning or by the result.” Id. at
960 (emphasis added). The court stated that it saw no reason to
distinguish the case before it — in which the party sought to
raise a new legal argument on resentencing — from Leonzo, in
which the government sought to introduce new evidence. Id. at
959. In adopting this so-called “waiver rule,” the court rejected
the “de novo rule,” under which some circuits permit district
courts to presume de novo resentencing on an open record unless
specifically directed otherwise by the appellate court. Id. at
959–60 (collecting cases); see also, e.g., United States v. West,
646 F.3d 745, 748–49 (10th Cir. 2011); Kuo, 620 F.3d at 1166(9th Cir.). The court observed that the plain-error exception
would suffice to protect against any risk of a miscarriage of
justice. See Whren, 111 F.3d at 960 (citing FED. R. CRIM. P.
52(b)); see also United States v. Johnson, 378 F.3d 230, 243 (2d
Cir. 2004). In United States v. McCoy, 313 F.3d 561 (D.C. Cir.
2002), the en banc court stepped further back from a bright line
waiver rule, holding that Whren does not preclude a defendant
from raising on remand an issue that was only contingently
relevant in the original sentencing but became determinative
under the remand order if the defendant can “establish ‘good
17
cause,’ within the meaning of Rule 32[(i)(1)(D)] of the Federal
Rules of Criminal Procedure, for not having raised it sooner.”
Id. at 562.
No special circumstances are present that would warrant
reopening the record on restitution in Fair’s case. The
government’s burden to prove actual loss under the MVRA was
well-established before sentencing. See also Tr. Oct. 22, 2009
at 23 (government counsel stating, “[w]e welcome the burden to
prove restitution.”). The government was allowed to present
evidence, unlike in Gallant, 537 F.3d at 1222, 1254, and the
demonstration of actual loss cannot be said to have been
“contingent” at the original sentencing on the resolution of a
different issue, see McCoy, 313 F.3d at 561–63. Indeed,
whether the government had offered evidence demonstrating
actual loss was the central issue addressed during the parties’
restitution discussion at the sentencing hearing. See, e.g., Tr.
Oct. 22, 2009 at 20–28. Moreover, although this circuit had not
spoken directly to the issue, other circuits had addressed the
requirements of the MVRA’s plain text prior to Fair’s
sentencing. Accordingly, because the government presented no
evidence of Adobe System’s actual loss as a result of Fair’s
sales of pirated copies of its software, we vacate the order of
restitution.