FDIC v. Dover

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 06a0241p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
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Plaintiff-Appellant, -
FEDERAL DEPOSIT INSURANCE CORPORATION,
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-
-
No. 04-6437
v.
,
>
RICHARD E. DOVER, -
Defendant-Appellee. -
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Appeal from the United States District Court
for the Eastern District of Tennessee at Knoxville.
No. 03-00210—R. Leon Jordan, District Judge.
Argued: December 1, 2005
Decided and Filed: July 11, 2006
Before: BOGGS, Chief Judge; BATCHELDER, Circuit Judge; and COHN, District Judge.*
_________________
COUNSEL
ARGUED: Kathleen V. Gunning, FEDERAL DEPOSIT INSURANCE CORPORATION,
Arlington, Virginia, for Appellant. Dean B. Farmer, HODGES, DOUGHTY & CARSON,
Knoxville, Tennessee, for Appellee. ON BRIEF: Kathleen V. Gunning, FEDERAL DEPOSIT
INSURANCE CORPORATION, Arlington, Virginia, for Appellant. Dean B. Farmer, Kristi M.
Davis, HODGES, DOUGHTY & CARSON, Knoxville, Tennessee, for Appellee.
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OPINION
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BOGGS, Chief Judge. This is a case of statutory interpretation. The Federal Deposit
Insurance Corporation (“FDIC”) appeals from a grant of summary judgment dismissing the FDIC’s
suit to collect $19.6 million under a criminal restitution order entered pursuant to 18 U.S.C. § 3663,
part of the Victim and Witness Protection Act (“VWPA”) of 1982,. The action was instituted before
the repeal of the Act. The outcome turns on an interpretation of the Act. We reverse in part and
affirm in part and order that summary judgment be entered in favor of the FDIC.
*
The Honorable Avern Cohn, United States District Judge for the Eastern District of Michigan, sitting by
designation.
1
No. 04-6437 Federal Deposit Ins. Corp. v. Dover Page 2
I
In 1991, Richard E. Dover (“Dover”), now a resident of Knoxville, pled guilty to two counts
of making a false statement to Sunbelt Federal Savings, in violation of 18 U.S.C. § 1014. The
conduct underlying the offenses to which he pled guilty concluded in 1985. At a sentencing hearing
in 1993, the United States District Court for the Southern District of Texas (“sentencing court”)
sentenced Dover to two years of probation on each count, running concurrently. Under the VWPA,
the sentencing court also entered an order for criminal restitution in the amount of $19,620,928.58.
This was imposed as a “special condition of probation.” The sentencing court ordered further that
restitution payments would constitute payment against a $284 million civil judgment that had been
entered against Dover in 1990 in favor of Sunbelt, and, conversely, payments on the civil judgment
would count as restitution. Restitution was to be paid to the District Court Clerk for disbursement
to the Resolution Trust Corporation (“RTC”), the receiver for the victim.
RTC sold its interest in the civil judgment to Stonehenge/FASA in 1994. In 1995, when
Dover was released from dischargeable debts by a bankruptcy court, he settled this claim with
Stonehenge/FASA for $5,000.
Following the failure of Sunbelt, the FDIC succeeded to the victim’s interest in the
restitution. It is undisputed that, although Section 3663(f) was repealed in 1996, it applies to this
case because Dover was sentenced while it was still in effect.
In 1998, Dover completed his probation. He had not made any restitution payments (save
for the $5,000 settlement, which counts towards the restitution) by this time. The FDIC’s amended
complaint therefore seeks a restitution amount $5,000 lower than that originally sought.
The United States Attorney’s Office in Knoxville, Tennessee, filed discovery requests in
October 2002 and instituted an action to enforce the restitution of $19.6 million. In January 2003,
the district court granted the FDIC’s motion, unopposed by Dover, to intervene in the action. Three
months later, the FDIC filed a complaint with the district court to recover $19.6 million in restitution
pursuant to 18 U.S.C. § 3663(h), the clause that1 empowers the victim to pursue enforcement “in the
same manner as a judgment in a civil action.”
The United States withdrew and the district court permitted the FDIC to proceed in its
parallel action. Pursuant to the order of the district court, the parties filed motions for summary
judgment.
Dover argued that, as a “special condition” of his probation, his obligation to pay restitution
expired at the end of his probation under the time limits set forth in § 3663(f)(2). He also argued
that the release of his civil liability on the $284 million judgment foreclosed the FDIC’s action to
collect restitution. The FDIC argued that, because the sentencing court had ordered Dover’s
restitution payable immediately, not within a specified period or in specified installments, certain
1
18 U.S.C. § 3663(h) provides:
(h) An order of restitution may be enforced–
(1) by the United States–
(A) in the manner provided for the collection and payment of fines in subchapter B of chapter 229 of
this title; or
(B) in the same manner as a judgment in a civil action; and
(2) by a victim named in the order to receive the restitution, in the same manner as a judgment in a
civil action.
18 U.S.C. § 3663(h).
No. 04-6437 Federal Deposit Ins. Corp. v. Dover Page 3
statutory time limits contained in § 3663(f)(2) did not apply.2 The FDIC also argued that this
section places time limits only on the sentencing court’s authority to schedule payment of restitution;
it does not terminate the defendant’s obligation to pay at the end of those statutory time limits if
restitution is still outstanding.
The district court held that the civil settlement of the $284 million judgment did not affect
the restitution order. It held that private parties cannot release criminal wrongdoers from
punishment. However, the court granted summary judgment for Dover. The court relied primarily
on United States v. O’Brien, 109 F. App’x 49 (6th Cir. 2004) and its interpretation of United States
v. Joseph, 914 F.2d 780 (6th Cir. 1990). It adopted the conclusions of the O’Brien court that:
1) a defendant’s restitution obligation may not be extended beyond the time periods
mentioned in § 3663(f), and
2) when the deadlines have passed, the restitution obligation has expired and cannot be
enforced.
The district court therefore found that Dover’s restitution order had expired at the end of his
probation and that the FDIC was not entitled to pursue enforcement of the restitution order. The
FDIC filed a timely notice of appeal.
We review de novo the grant of summary judgment in favor of Dover. Boone v. Spurgess,
385 F.3d 923, 927 (6th Cir. 2004). We hold that the district court erred in finding that an
immediately payable restitution order entered under 18 U.S.C. § 3663(f)(3) expired at the end of the
criminal defendant’s probation period. We affirm the district court’s conclusion that settlement of
a civil judgment with the victim and satisfaction of that judgment does not estop the FDIC from
collecting criminal restitution in favor of the same victim.
II
This case presents a question of first impression, insofar as it concerns a restitution order
pursuant to the now-repealed terms of the VWPA, a sentence including probation and restitution but
no imprisonment, and an order by the sentencing court for immediate payment of the restitution,
rather than by a schedule of installments or by a fixed date in the future.
III
In the court below, Dover argued that his obligation to pay restitution expired at the end of
his probation because he was ordered to pay restitution as a special condition of that probation. The
FDIC argued that the restitution’s having been made a special condition was immaterial to its expiry,
and that the time limitations contemplated in § 3663(f)(2)(A) were inapplicable because the
2
18 U.S.C. § 3663(f) provides:
(f)(1) The court may require that such defendant make restitution under this section within a specified
period or in specified installments.
(2) The end of such period or the last such installment shall not be later than–
(A) the end of the period of probation, if probation is ordered;
(B) five years after the end of the term of imprisonment imposed, if the court does not order probation;
and
(C)five years after the date of sentencing in any other case.
(3) If not otherwise provided by the court under this subsection, restitution shall be made immediately.
....
18 U.S.C. § 3663(f).
No. 04-6437 Federal Deposit Ins. Corp. v. Dover Page 4
sentencing court ordered the restitution to be paid immediately, rather than on a schedule, as
contemplated by § 3663(f)(1)-(2).
The district court found United States v. Joseph, 914 F.2d 780 (6th Cir. 1990) controlling.3
The Joseph court had concluded that subsection (f) “expressly limits the life of a restitution order.”
Joseph, 914 F.2d at 786. The district court noted that the more recent United States v. O’Brien, 109
F. App’x 49 (6th Cir. 2004) affirmed Joseph as good law.
Because interpretation of Joseph and O’Brien supported the district court’s analysis, and
because those cases might appear quite similar to the facts here, further exposition of the precedents
is useful.
We distinguish Joseph on two chief grounds: first, the district court in that case ordered
restitution to be paid at specified times (or at least at times to be specified later), not immediately,
and second, our discussion of time limits in that case was situated, if not expressly couched, in the
context of payment on a required security agreement.
Joseph pled guilty to making a false statement to the Small Business Administration and to
filing a false federal income tax return. The district court sentenced him to two years of
imprisonment for the false statement, and imposed a three-year suspended sentence and five-year
probation for the tax violation. The court further ordered him to pay restitution as “one of the
conditions of” the probation for the tax violation. Joseph, 914 F.2d at 781. The Joseph court quoted
the language of the district court’s order:
The defendant shall pay restitution in the amount of $318,000, . . . which amount will
fairly compensate the SBA for any unpaid advances it made, and . . . defendant and
the SBA [will] execute forthwith a consent judgment in favor of the SBA in such
amount, which shall be in full settlement of all claims of the SBA against defendant;
and defendant will execute security agreements to secure its payment during and
after the period of probation. The payment of such restitution shall be by periodic
payments during the period of probation in the amounts and in accordance with the
payment schedule to be established by the Probation Department, which schedule
may be adjusted by the Probation Department as it determines appropriate during the
period of probation.
Quoted in Joseph, 914 F.2d at 783. (Emphasis supplied.)
We note that the district court ordered, pursuant to the language of what is now numbered
§ 3663(f)(1), periodic payments. This distinguishes our case from Joseph. Dover’s sentencing
judge ordered that his restitution be paid “immediately.”
This court ultimately refused to enforce payment of Joseph’s unpaid restitution agreement.
We held that “[i]f restitution is ordered under the Victim Act, finally, the court may not require the
defendant to execute a consent judgment or otherwise require him to secure payment ‘during and
after the period of probation.’” Id. at 786.
We must look to the opinion’s bar on “otherwise requir[ing] him to secure payment ‘during
and after the period of probation.’” We find that it is not intended to prohibit all restitution
extending beyond the time of probation. We find instead that the key to its meaning lies in the word
“secure,” and we note that time limits were discussed in that case in the context of contractual
3
Joseph addressed 18 U.S.C. § 3579(f). The Comprehensive Crime Control Act of 1984 renumbered §§ 3579
and 3580 as §§ 3663 and 3664, without change in their language.
No. 04-6437 Federal Deposit Ins. Corp. v. Dover Page 5
instruments such as promissory notes. In Joseph, immediately following the sentence quoted supra,
we quoted sections of the statute and cited United States v. Bruchey, 810 F.2d 456 (4th Cir. 1987)
as instructive. In that case, the “Fourth Circuit held that it was error for the district court to exact
a promissory note on which the victim could have brought suit for 21 years[.]” Joseph at 786. We
quoted the Bruchey court’s statement, inter alia, that the “victim and defendant never ‘agreed’ on
the terms of a promissory note and we conclude that the district court should not compel a defendant
to sign such an ‘agreement.’” Ibid. Because this was the section the Joseph court quoted, we
conclude that we intended to emphasize the phrase “secure payment,” and that, for the purposes
contemplated in that case, an “otherwise” method of securing payment was understood to be through
a vehicle such as a promissory note.
The facts of the unpublished O’Brien case are closer to the facts here. In O’Brien, the
defendant pled guilty to bank fraud and money laundering. The district court sentenced him to a
term in prison and supervised release, plus restitution. O’Brien never paid. The United States sued
him in federal court. We adopted the district court’s interpretation of the Government’s suit as an
effort to enforce the restitution order in that case. O’Brien, 109 F. App’x at 50. Our court then
reversed the district court’s grant of summary judgment to the government. Our analysis from that
case was closely followed by the district court in the case now before us. The key part follows:
The district court erred in granting the Government's motion for
summary judgment because the criminal restitution order has expired
and is no longer enforceable against O’Brien. When O’Brien was
sentenced in 1995, federal law permitted sentencing judges to order
a defendant to pay restitution immediately or to order that a
defendant pay restitution within a specified period or in specified
installments. See 18 U.S.C. § 3663(f) (1995). The statute provided,
however, that the payment period could not extend beyond five years
after the end of any term of imprisonment imposed or beyond the
term of probation where no term of imprisonment is imposed. 18
U.S.C. § 3663(f)(2)(B). In United States v. Joseph, 914 F.2d 780 (6th
Cir.1990), this court concluded that this provision expressly limited
the life of criminal restitution orders, and the defendant’s restitution
obligation could not be extended beyond the statutory period. Id. at
786. In so holding, the court noted that, during the statutory period,
the sentencing court retained the equitable power to modify a
criminal restitution order if a defendant’s circumstances change.
Once the statutory period ended, however, the sentencing court
would be without jurisdiction to make equitable adjustments. In the
instant case, there is no dispute that the statutory period has expired.
Accordingly, if the action filed by the Government is an attempt to
enforce the criminal restitution order, the district court erred in
granting summary judgment in favor of the Government, because the
criminal restitution order could no longer be enforced against
O’Brien.
O’Brien, 109 F. App’x at 51 (footnotes omitted)
The district court in Dover wrote that the “same analysis applies to the case now before the
court.”
There are at least two ways to distinguish O’Brien from our case. First, O’Brien was
sentenced to prison time plus restitution, not just probation and restitution. Second, the district judge
ordered O’Brien to “begin to pay the restitution ordered . . . immediately, to the extent possible
No. 04-6437 Federal Deposit Ins. Corp. v. Dover Page 6
. . . .” (Page 3 and n.1 of “Amended Judgment Including Sentence Under the Sentencing Reform
Act,” U.S. v. O’Brien, Case No. CR2-93-152, September 5, 1995). The district court in our case
simply ordered restitution “to be paid immediately,” without further qualification. In so doing, it
did not order a payment schedule that would extend beyond the time of its jurisdiction. An order
for complete immediate payment is distinguishable from an order to begin payment “to the extent
possible.” Because subsections 3663(f)(1) and (3) contemplate the timing and periodicity of
restitution payments–a “specified period” and “specified installments” are discussed in (f)(1) and
“immediate[]” payment is established as the default in (f)(3)–this distinction is important.
We do not rely solely on these distinctions between our case and O’Brien. As an
unpublished decision, O’Brien is not binding on this court. Insofar as O’Brien is interpreted to hold
that, where restitution is ordered to be paid immediately, a restitution order expires at the end of a
convict’s supervisory release or probation, we find that holding to be non-binding and that
interpretation to be incorrect.
Because § 3663(f)(1), Joseph, and O’Brien discuss imposition of restitution to be paid in
periodic installments, because the case now before us involves a clear order to pay restitution
immediately, and because the policy underlying restitution would be thwarted if a convict could
merely delay payment beyond the end of probation to escape his full punishment, this court declines
to follow the district court’s reasoning.
IV
Indeed, our reading of the statutory language, especially subsections (f)(1)-(3), indicates that
a cutoff date applies only where periodic or scheduled installments have been ordered. It is
consistent with the policy of restitution and also with the aim not to burden defendants with
restitution payments that are scheduled by the judge to be made long after the penalty of probation
or release has ended. However, it would be inconsistent with the policy of restitution to extend this
logic to orders of immediately payable restitution. Defendants should not be able to escape payment
of restitution permanently simply by avoiding payment for a while.
Our conclusion in this case as to the meaning and policy of § 3663 aligns this circuit with
the general trend of opinion in our sister courts.
In United States v. Rostoff, 164 F.3d 63 (1st Cir. 1999), the First Circuit held that
“[e]nforcement of [a] restitution order is governed not by subsection (f) . . . but by subsection (h).”
Id. at 67. The district court did not consider this case. The facts of Rostoff are similar to those of
Dover. The brothers Rostoff (Steven and David) were convicted of fraud, false statement, and
conspiracy in their commerce with a savings and loan. They were each sentenced to a prison term,
supervised release, and restitution “not to exceed $650,000.” Id. at 64 (internal quotations omitted).
Importantly, like the sentencing court in Joseph, the sentencing court in Rostoff ordered that the
restitution be paid “in installments as determined by the probation department.” Ibid. The Rostoffs
each paid only roughly $8,000 during their supervised release. However, they took steps to hide
assets belonging to them, in violation of the terms of their release. A fortnight before the end of the
Rostoffs’ period of supervised release, the United States sued both brothers, seeking a declaration
that the restitution debt was enforceable. The First Circuit upheld the district court’s ruling that the
restitution order had not expired.
Though it is possible to distinguish Rostoff on the grounds that the restitution in our case was
imposed with an order for immediate payment, the First Circuit’s reasoning is instructive,
particularly in its analysis of the VWPA’s purpose. The Rostoff court held that subsection (h)
“governed” the “[e]nforcement of the restitution order.” Id. at 67. It held further that this subsection
applied to restitution orders payable immediately but also to those payable at later dates. To hold
No. 04-6437 Federal Deposit Ins. Corp. v. Dover Page 7
otherwise, the court noted, would “create the anomalous result that an order of restitution that is due
immediately expires twenty years [the Massachusetts limit on enforcement of judgments in favor
of the government] after it is issued, while an order of restitution due in the future expires the instant
its due date passes.” Such a result would “give . . . defendants an incentive to ‘run[] out the clock
in the fourth quarter of play’ rather than redress their wrongs” and “would be entirely at odds with
the express object and policy of the VWPA of which subsection (f) is a part.” Id. at 67-68 (quoting
United States v. Rostoff, 956 F. Supp. 38, 43 (D. Mass. 1997) (internal quotations and citation
omitted).
In United States v. Idema, 118 F. App’x 740, 743 (4th Cir. 2005), the Fourth Circuit stated
clearly that “the time limitations in the VWPA do not apply to this case because the district court
ordered Idema to pay restitution immediately. The time limitations in § 3663(f) apply only when
the district court schedules payments over time or by installments.”
The Seventh Circuit squarely addressed the question before this court in United States v.
House, 808 F.2d 508 (7th Cir. 1986). Judge Easterbrook wrote for a unanimous panel:
Section 3579(f)(3) makes restitution due immediately, like an
ordinary debt. Section 3579(f)(1) allows the sentencing court to
depart from that rule and to establish a payment schedule–payment
“within a specified period or in specified installments.” Section
3579(f)(2) says that “[t]he end of such period or the last such
installment” shall come within a specified time. The reference–“such
period” or “such installment”–is to the periods and installments
established under § 3579(f)(1). Unless there is such a period or
installment, § 3579(f)(2) is inapplicable. So when an order to pay
restitution does not establish a period or set a schedule of
installments, it also is not limited in time.
This makes perfect sense. Restitution is a debt, which may be
collected using the means appropriate to other debts. 18 U.S.C.
§ 3579(h). Debts do not abate after five years. . . . The power of a
district judge to establish a schedule of repayment under § 3579(f)(1)
created a risk that the schedule would be so extended as to make the
order ineffectual. A defendant told to pay in 40 years has been told
he can keep the money. So § 3579(f)(2) limits the use of § 3579(f)(1)
to drag out the process of restitution. Such a limit is unnecessary
when payment is due immediately under § 3579(f)(3).
Id. at 511.
The Ninth Circuit cited and quoted House approvingly on this point in United States v.
Soderling, 970 F.2d 529, 535 n.12 (9th Cir. 1992). And the Eleventh Circuit appears to have favored
a similar position, if only briefly and in a footnote, in United States v. Fuentes, 107 F.3d 1515, 1533
n.33 (11th Cir. 1997), where it wrote that “although the sentencing court must determine the amount
of restitution in light of the defendant’s ability to pay within the time period provided by § 3663(f),
the defendant is not automatically ‘off the hook’ at the end of that period.”
With respect to the issue of the interpretation of the VWPA and enforcement of the
restitution, we reverse the judgment of the district court.
No. 04-6437 Federal Deposit Ins. Corp. v. Dover Page 8
V
The district court clearly ruled that Dover’s settlement of his civil liability of $284 million
(for $5,000) does not affect the restitution order. The FDIC concedes that the amount of that
settlement is to be deducted from the $19.6 million it is seeking to recover in this enforcement
action. Dover argues in his brief that the district court ruled incorrectly on this issue. Dover
contends that “the FDIC is estopped from further collection efforts because Mr. Dover settled with
the victim and paid the settlement in full.” (Appellee’s Brief, 27).
Dover’s argument fails. The district court properly cited United States v. Bearden, 274 F.3d
1031 (6th Cir. 2001) for the proposition that, in words of the Memorandum Opinion, a
settlement between a criminal wrongdoer and his victim that releases
the wrongdoer from further liability does not affect a district court’s
ability to impose a restitution order at sentencing. The fact that the
settlement in this case was entered into after the restitution was
ordered does not mean that the basic principle set out in Bearden
does not apply. Id. at 2041 (A purpose of criminal restitution is
punishment. ‘It would be improper to permit private parties to
release criminal wrongdoers from punishment.’).
Our court has spoken convincingly in favor of the FDIC’s position on this point. Settlement
of a civil liability does not affect enforcement of a restitution order except insofar as the amount of
that settlement might, consistent with the terms of the original sentence, count against the
recoverable amount in the enforcement suit. We affirm this portion of the district court’s judgment.
VI
We REVERSE in part and AFFIRM in part and order that summary judgment be entered
in favor of FDIC.