United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
July 2, 2004
FOR THE FIFTH CIRCUIT
_____________________ Charles R. Fulbruge III
Clerk
No. 03-31133
_____________________
UNITED STATES OF AMERICA,
Plaintiff - Appellant,
versus
LOGAN L. NICHOLS,
Defendant - Appellee.
__________________________________________________________________
Appeal from the United States District Court
for the Western District of Louisiana
_________________________________________________________________
Before JOLLY, DAVIS, and JONES, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
Logan L. Nichols pled guilty to one charge of insider trading.
The district court imposed a sentence that downwardly departed from
the applicable sentencing guidelines. Because the district court
did not apply and articulate a legal basis for the downward
departure, we VACATE the sentence and REMAND for resentencing.
I
Logan L. Nichols and three co-defendants were charged with
insider trading under 18 U.S.C. § 371, and Nichols entered a guilty
plea. Nichols had acted on two separate tips from the senior vice
president of USA Waste Services, Inc., regarding the acquisition of
one company and the later merger with a second company. Nichols
made a total of $230,475 profit on these tips. He also passed the
tips on to several friends, who also profited.
Relying on the 1997 guidelines, the Presentencing Report
(“PSR”) calculated a total offense level of 13 and a criminal
history category of I.1 The guideline range was 12-18 months
imprisonment and a fine range of $3,000 to $30,000. Moreover, the
guidelines categorized this as a “Zone D” sentence, which requires
some term of imprisonment. The district court sentenced Nichols to
five years probation, twelve months of which were to be served in
home confinement with electronic monitoring, 500 hours of community
service, and ordered that he pay the $100 special assessment. The
court declined to impose an additional fine.
The district court departed downward for three reasons that it
detailed orally, which we will later discuss. The district court
did not issue a written statement of reasons. The government
filed a timely notice of appeal of the downward departure under 18
U.S.C. § 3742(b).
II
The district court is required to “state in open court the
reasons for its imposition of the particular sentence” and, if a
departure from the applicable sentencing guideline range is
involved, “the specific reason” for the departure, which “must also
1
Specifically, the base offense level was 8 per U.S.S.G. §
2F1.2, eight levels were added due to Nichols’s gain of $230,475
per U.S.S.G. § 2F1.2(b)(2), and three levels were subtracted for
acceptance of responsibility per U.S.S.G. § 3E1.1.
2
be stated with specificity in the written order of judgment.” 18
U.S.C. § 3553(c)(2). Because the district court here failed to
provide the written statement of reasons, we review its sentencing
order de novo. 18 U.S.C. § 3742(e).2
A district court must impose a sentence within the guideline
range “unless the court finds that there exists an aggravating or
mitigating circumstance of a kind, or to a degree, not adequately
taken into consideration by the Sentencing Commission in
formulating the guidelines that should result in a sentence
different from that described.” 18 U.S.C. § 3553(b) (2000). Here,
the district court referred to three factors that it believed
justified the imposition of a lesser sentence.
First, the district court considered Nichols’s significant
“disgorgement” to the SEC as the result of a civil forfeiture
action. The court qualified its reliance on this factor, however,
by noting that it would consider this factor not for purposes of
the downward departure, but in the totality of the circumstances.
Thus, this factor’s role in the departure decision is unclear.
This Court has not addressed whether a district court may rely
on a civil forfeiture when deciding whether to depart downward.
2
Nichols’s argument that the abuse of discretion standard
applies to this case is wholly without merit in the light of the
PROTECT Act’s mandate. Pub. L. 108-21, 117 Stat. 650 (2003),
(amending, inter alia, 18 U.S.C. § 3553(c) and § 3742(e)).
Nichols’s sentence was not imposed, and the instant appeal was not
filed, until after the Act’s effective date (April 30, 2003).
3
Under Koon v. United States, 518 U.S. 81 (1996), the first question
must be whether a factor is “discouraged” or “prohibited” under the
sentencing guidelines. Section 5K2.0, relying on section 3553(b),
states that
an offender characteristic or other
circumstance that is not ordinarily relevant
in determining whether a sentence should be
outside the applicable guideline range may be
relevant to this determination if such
characteristic or circumstance is present to
an unusual degree and distinguishes the case
from the ‘heartland’ cases covered by the
guidelines in a way that is important to the
statutory purposes of sentencing.
U.S.S.G. § 5K2.0 (1997) (emphasis added). Thus, if a factor is
“discouraged,” as opposed to “prohibited,” the district court may
rely on it when making a decision to depart downward. Koon, 518
U.S. at 95-96. In addition, if a factor is “unmentioned” by the
sentencing guidelines, “the court must, after considering the
‘structure and theory of both relevant individual guidelines and
the Guidelines taken as a whole,’ decide whether it is sufficient
to take the case out of the Guideline’s heartland.” Id.
Every circuit to examine the issue has held that civil
forfeiture may not be used as a basis for departure from the
sentencing guidelines. See United States v. Shirk, 981 F.2d 1382,
1397 (3d Cir. 1992), vacated on other grounds, 510 U.S. 1068
(1994); United States v. Weinberger, 91 F.3d 642, 644-45 (4th Cir.
1996); United States v. Hendrickson, 22 F.3d 170, 175-76 (7th Cir.
1994); United States v. Crook, 9 F.3d 1422, 1425-26 (9th Cir.
4
1993); United States v. Hoffer, 129 F.3d 1196, 1203 (11th Cir.
1997). These courts rely on the fact that the guidelines treat
civil forfeiture as a wholly separate sanction that is to be
imposed in addition to, and not in lieu of, imprisonment. See
Hoffer, 129 F.3d at 1203; U.S.S.G. § 5E1.4 (“Forfeiture is to be
imposed upon a convicted defendant as provided by statute.”). In
addition, the guidelines contemplate civil forfeiture as a relevant
factor when setting or reducing applicable fines, but make no such
mention of the factor in the departure context. See U.S.S.G. §
5E1.2(d)(5). We thus hold that civil forfeiture is an
impermissible factor on which to base a downward departure.
Second, the court mentioned the fact that Nichols had been an
upstanding citizen. The sentencing guidelines classify civic and
charitable good works and a defendant’s community ties as
“discouraged” factors in deciding whether to depart from the
guideline range. See U.S.S.G. §§ 5H1.6, p.s., 5H1.11, p.s. Thus,
the court may depart only “if that factor is present to an
exceptional degree or in some other way makes the case different
from the ordinary case where the factor is present.” Koon, 518
U.S. at 96. Whether such exceptional circumstances exist here
cannot be discerned from the sentencing colloquy because the
district court did not elaborate on Nichols’s civic good works or
community ties. We therefore conclude that this factor does not
justify the downward departure in this case.
5
Finally, the district court relied most heavily on the
disparity between Nichols’s guideline range and that of his co-
defendants. The court noted that Nichols’s guideline range was
significantly higher than his co-defendants’ because 1) he made a
larger “investment” in the traded stock and 2) at least two of his
co-defendants received downward adjustments for substantial
assistance to the authorities under section 5K1.1.
The government argues that the sentencing disparities result
from a straightforward application of the sentencing guidelines,
which contemplate different sentences based on different individual
facts. For instance, Nichols’s guideline range was higher than the
ranges of his co-defendants because Nichols profited from the
insider trading more than any other co-defendant. Because Nichols
made $230,475, his offense level was increased by 8 levels.
U.S.S.G. § 2F1.1(b)(1)(I) (for gain over $200,000, add 8 levels).
In addition, one co-defendant received a downward adjustment for
the substantial assistance he provided to the government; the
guidelines specifically reward such assistance with a two-level
downward adjustment. U.S.S.G. § 5K1.1. Nichols was not asked to
and did not provide such assistance. Thus, the government argues,
the guidelines have already contemplated sentence disparities
resulting from both differing amounts of unlawful profit and
differing levels of assistance to the government among co-
defendants.
6
Nichols relies on United States v. Wright, 211 F.3d 233 (5th
Cir. 2000), for the proposition that district courts may consider
sentencing disparities between co-conspirators when deciding
whether to depart from the guidelines. We noted in Wright that,
after Koon, categorical rejection of departure factors was
improper. Id. at 238. As the district court in Wright did not
believe it could rely on sentence disparities, we remanded for re-
sentencing. Wright, 211 F.3d at 239.
Yet Wright represents our only post-Koon decision dealing with
the sentence disparity factor, and offers no guidance as to the
circumstances in which a departure may be based on such a
disparity. Thus, it is helpful to look at decisions outside this
circuit. For example, the Seventh Circuit has distinguished
between “justified” and “unjustified” disparities and noted that
only “unjustified” disparities could support a decision to depart
from the guidelines. United States v. Meza, 127 F.3d 545, 549 (7th
Cir. 1997). The Meza court defined “justified” disparities --
those that may “never be a basis for departure” -- as those
“result[ing] from the proper application of the Guidelines to the
particular circumstances of a case.” Id. It noted that disparate
sentences resulting from acceptance of a plea agreement or
adjustment under section 5K1.1 are examples of “justified”
disparities. Id.
In the present case, the disparity results entirely from “the
proper application of the Guidelines to the particular
7
circumstances of [the] case,” as discussed supra. The disparity
cannot form the basis of the district court’s decision to depart
because it results from factors already taken into consideration by
the sentencing guidelines.
In sum, none of the reasons given by the district court in its
sentencing colloquy justifies the decision to depart from the
guidelines.
III
For the foregoing reasons, Nichols’s sentence is VACATED, and
the case is REMANDED for resentencing in a manner consistent with
this opinion.3
VACATED and REMANDED.
3
Under the PROTECT Act, the district court “shall not impose
a sentence outside the applicable guidelines range except upon a
ground that . . . was specifically and affirmatively included in
the written statement of reasons required by section 3553(c) in
connection with the previous sentencing of the defendant prior to
the appeal.” 18 U.S.C. § 3742(g)(2)(A). Because the district
court failed to provide a written statement of reasons, it is
precluded from departing from the sentencing guidelines on remand.
8