NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 15a0790n.06
Nos. 14-6201/15-5109
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
UNITED STATES OF AMERICA, ) Dec 04, 2015
) DEBORAH S. HUNT, Clerk
Plaintiff-Appellee, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE EASTERN DISTRICT OF
SETH JOHNSTON, ) KENTUCKY
)
Defendant-Appellant. )
BEFORE: COLE, Chief Judge; SUTTON, Circuit Judge; BELL, District Judge.*
PER CURIAM. Seth Johnston appeals his sentence.
Johnston, a former attorney, pleaded guilty to two counts of mail fraud, in violation of
18 U.S.C. § 1341, wire fraud, in violation of 18 U.S.C. § 1343, conspiracy to obstruct justice, in
violation of 18 U.S.C. § 1512(k), conspiracy to distribute synthetic marijuana, in violation of
21 U.S.C. §§ 841(a)(1) and 846, and attempting to evade or defeat a tax, in violation of
26 U.S.C. § 7201. Johnston’s crimes, as relevant to this appeal, included several fraudulent
schemes. In one scheme, Johnston’s former law firm was hired to assist with collecting on a
judgment that hundreds of plaintiffs obtained in a class action lawsuit. Johnston diverted for his
personal use the proceeds of certain checks that were intended to satisfy a portion of the
judgment. In another scheme, Johnston, who was hired to represent the estate of a deceased
*
The Honorable Robert Holmes Bell, United States District Judge for the Western
District of Michigan, sitting by designation.
Nos. 14-6201/15-5109
United States v. Johnston
individual, hid assets and diverted money from the rightful heirs for his own benefit and for the
benefit of the estate’s executor. In the final scheme, Johnston misappropriated his client’s funds
that he was given access to for the purpose of establishing several limited liability companies and
bank accounts.
The district court determined that, based on his total offense level of 41 and criminal
history category of II, Johnston’s guidelines range of imprisonment was 360 months to life. The
court varied downward, however, and sentenced Johnston to an aggregate term of 240 months in
prison. Johnston appealed his sentence, and the appeal was docketed as Case No. 14-6201. The
district court subsequently entered a restitution order. Johnston appealed the order, and his
appeal was docketed as Case No. 15-5109. The appeals have been consolidated for submission.
On appeal, Johnston raises the following challenges to his sentence: (1) the district court
erred by imposing a six-level increase under USSG § 2B1.1(b)(2)(C) based on the number of
victims; (2) the district court erred by failing to reduce the loss amount by the value of certain
pledged collateral; (3) the district court improperly inflated the loss amount with money that was
never removed from the accounts of the limited liability companies; (4) the district court
improperly grouped his fraud and obstruction of justice offenses; (5) the district court erred by
imposing a two-level increase under USSG § 3B1.1(c) for his role in the offense; (6) the district
court erred by imposing a two-level increase under USSG § 2B1.1(b)(9)(C) for his violation of a
prior judicial order; (7) the district court erred by denying him an offense level reduction under
USSG § 3E1.1 for acceptance of responsibility; (8) the district court erred by imposing a two-
level increase under USSG § 2B1.1(b)(10)(C) based on its finding that his fraud offenses
involved sophisticated means; and (9) his sentence is procedurally and substantively
unreasonable.
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Nos. 14-6201/15-5109
United States v. Johnston
Johnston first argues that the district court erred by imposing a six-level increase under
§ 2B1.1(b)(2)(C) based on its finding that there were more than 250 victims. Johnston contends
that the 382 class action plaintiffs should not be counted as victims because their losses were
necessarily temporary, given that they would be reimbursed either by Miller & Wells, his former
law firm, or by Angela Ford, the lawyer who had obtained judgment for the plaintiffs and who
was overseeing the collection effort. Johnston further contends that, for two reasons, the class
action plaintiffs suffered no losses and were therefore not victims: (1) because he maintained
their diverted funds in a client escrow account; and (2) because the amount of loss was offset by
the value of legal services that he provided to the plaintiffs after leaving Miller & Wells.
We review a district court’s legal interpretation of the guidelines de novo and its factual
findings for clear error. United States v. Stubblefield, 682 F.3d 502, 510 (6th Cir. 2012).
Whether a person is a victim under the guidelines is a legal conclusion that we review de novo.
Id. Section 2B1.1(b)(2)(C) of the guidelines provides for a six-level increase if an offense
involves 250 or more victims. A victim is “any person who sustained any part of the actual
loss.” USSG § 2B1.1 cmt. n.1. Actual loss is the reasonably foreseeable pecuniary harm that
resulted from the offense. USSG § 2B1.1 cmt. n.3(A)(i).
The district court properly concluded that the 382 class action plaintiffs were victims for
purposes of the enhancement under § 2B1.1(b)(2)(C). The plaintiffs suffered a pecuniary loss
because Johnston diverted funds that would have otherwise been distributed to them. The fact
that the plaintiffs may have been able to obtain reimbursement for their losses from Miller &
Wells or Ford does not negate their status as victims because the nature of the plaintiffs’
relationship with Miller & Wells and Ford did not render their losses necessarily temporary or
their reimbursement automatic. See Stubblefield, 682 F.3d at 511-12; United States v.
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United States v. Johnston
Erpenbeck, 532 F.3d 423, 442 (6th Cir. 2008). In addition, Johnston was not entitled to offset
the plaintiffs’ losses with funds in his client escrow account because he failed to return the
diverted funds to the plaintiffs before his offenses were detected. See USSG § 2B1.1 cmt.
n.3(E)(i). Finally, the district court properly determined that Johnston was not entitled to offset
the plaintiffs’ losses with the value of legal services he provided to them after leaving Miller
& Wells. The court concluded that Johnston did not provide any service for which he was
unpaid, and that finding was not clearly erroneous, given Ford’s testimony that Johnston
performed no significant work for the plaintiffs after leaving Miller & Wells.
Johnston next argues that the district court erred by failing to reduce the loss amount by
the value of certain pledged collateral. In a case involving collateral pledged or otherwise
provided by the defendant, a district court must reduce the loss amount by the amount recovered
at the time of sentencing from disposition of the collateral or, if the collateral has not been
disposed of, by the fair market value of the collateral at the time of sentencing. USSG § 2B1.1
cmt. n.3(E)(ii). The district court properly denied Johnston an offset because he did not pledge
or otherwise provide collateral in any of his fraudulent schemes. See United States v. Terbrack,
399 F. App’x 105, 108 (6th Cir. 2010).
Johnston next argues that the district court improperly inflated the loss amount by
$1,157,517.08 that was never removed from the accounts of the limited liability companies. Any
error that occurred is harmless, however, because, even if the contested amount were excluded
from the loss calculation, the total loss would still exceed $2.5 million and Johnston would be
subject to the same 18-level enhancement under USSG § 2B1.1(b)(1)(J). See United States v.
Tran, 609 F. App’x 295, 301 (6th Cir. 2015).
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Nos. 14-6201/15-5109
United States v. Johnston
Johnston next argues that, when calculating his guidelines range, the district court
improperly grouped his fraud and obstruction of justice offenses because they involved different
victims. Because Johnston did not raise this argument in the district court, we review it for plain
error only. See United States v. Vonner, 516 F.3d 382, 385−86 (6th Cir. 2008) (en banc). The
district court did not plainly err by grouping the mail and wire fraud convictions because their
offense level was determined largely on the basis of the total amount of harm or loss. See USSG
§ 3D1.2(d) & cmt. n.6. And the court did not plainly err by grouping the obstruction of justice
offense with the fraud offenses because the obstruction offense is treated as an adjustment to the
guidelines applicable to the fraud offenses. See USSG §§ 3C1.1 & cmt. n.8, 3D1.2(c).
Johnston next argues that the district court erred by adopting the recommendation in the
presentence report to impose a two-level increase under § 3B1.1(c) based on his status as an
organizer, leader, manager, or supervisor of criminal activity. Johnston did not raise this issue in
his written objections to the presentence report, but, during the evidentiary hearing that the
district court conducted to consider objections, defense counsel informed the court that the role
enhancement was at issue. The court adopted the calculations in the presentence report, but it
did not specifically address the role enhancement at the hearing or in its subsequent written
opinion. Johnston again objected to the role enhancement in his motion for a variance that he
filed prior to the sentencing hearing, and, although the district court acknowledged the motion, it
again failed to specifically address the role enhancement. Because the district court failed to
affirmatively rule on the disputed role enhancement, procedural error occurred, and we must
remand for resentencing. See Fed. R. Crim. P. 32(i)(3)(B); United States v. Ross, 502 F.3d 521,
531 (6th Cir. 2007); see also United States v. Chavez, 547 F. App’x 772, 772 (6th Cir. 2013).
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Johnston next argues that the district court erred by imposing a two-level increase under
§ 2B1.1(b)(9)(C). That subsection applies where a defendant commits a fraud in violation of a
prior, specific judicial order not addressed elsewhere in the guidelines. USSG § 2B1.1(b)(9)(C)
& cmt. n.8(C). The district court properly applied the two-level increase, given the evidence that
Johnston and the executor of the estate he represented fraudulently diverted estate assets in
violation of a probate court’s order to distribute the assets to the rightful beneficiaries, or at the
very least, Johnston aided and abetted the diversion.
Johnston next argues that the district court erred by denying him an offense level
reduction under § 3E1.1 for acceptance of responsibility after accepting his plea agreement,
which recommended the reduction. Defendants who receive an enhancement for obstruction of
justice are eligible for a reduction based on acceptance of responsibility only in extraordinary
cases. United States v. Angel, 355 F.3d 462, 477 (6th Cir. 2004). By its terms, the sentencing
recommendation in the plea agreement was not binding on the district court. And the court did
not err by denying Johnston a reduction for acceptance of responsibility, given the evidence that
he directed the destruction of documents relevant to his case and violated the court’s order to
refrain from contact with his co-defendants.
Johnston next argues that the district court erred by applying a two-level enhancement
under § 2B1.1(b)(10)(C) based on its conclusion that his fraud offenses involved sophisticated
means. A sophisticated-means enhancement is appropriate where an offense involves especially
complex or intricate conduct pertaining to the execution or concealment of the offense. USSG
§ 2B1.1 cmt. n.9(B). The district court did not err by applying the enhancement, given the
evidence that Johnston’s fraud offenses involved a complex scheme of money transfers and the
use of fraudulent bank documents. See United States v. Kennedy, 714 F.3d 951, 961 (6th Cir.
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United States v. Johnston
2013). In addition, Johnston’s reliance on a proposed amendment to the commentary of § 2B1.1
is misplaced because the Sentencing Commission has not yet adopted the amendment. USSG
§ 2B1.1 cmt. n.9(B) (amended Nov. 1, 2015). Even if the Sentencing Commission had adopted
this amendment, the revised application note appears to be a substantive change that would not
be retroactively applicable to Johnston. See USSG § 1B1.11(b)(2); United States v. Finley, 600
F. App’x 964, 968 (6th Cir. 2015).
Finally, Johnston argues that his sentence is procedurally unreasonable because the
district court relied on erroneous facts and substantively unreasonable because his sentence was
disproportionate to similarly situated offenders. Johnston has not shown, however, that the
district court based his sentence on erroneous facts. See Gall v. United States, 552 U.S. 38, 51
(2007). And given the need to remand the case for resentencing, we need not address Johnston’s
claim that his sentence is substantively unreasonable.
Accordingly, we vacate Johnston’s sentence and remand to the district court for a ruling
on the disputed role enhancement under USSG § 3B1.1(c) and resentencing.
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