FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, Nos. 15-30213
Plaintiff-Appellee, 15-30225
v. D.C. Nos.
2:14-cr-00232-JLR-3
JESSE D. KAPLAN; DANIEL 2:14-cr-00232-JLR-2
JAMES STRYCHARSKE,
Defendants-Appellants. OPINION
Appeal from the United States District Court
for the Western District of Washington,
James L. Robart, District Judge, Presiding
Argued and Submitted August 29, 2016
Seattle, Washington
Filed October 7, 2016
Before: Michael Daly Hawkins and M. Margaret
McKeown, Circuit Judges, and David A. Ezra,* District
Judge.
Opinion by Judge Ezra
*
The Honorable David Alan Ezra, Senior United States District Judge
for the District of Hawaii, sitting by designation.
2 UNITED STATES V. KAPLAN
SUMMARY**
Criminal Law
The panel affirmed Jesse Kaplan’s and Daniel
Strycharske’s sentences of imprisonment and the district
court’s award of restitution in a case in which an explosion
during hash oil manufacturing engulfed an apartment building
complex in flames and caused severe injuries and one death.
The panel held that district courts have discretion in
calculating restitution, and that while fair market value
generally provides the best measure to ensure restitution in
the full amount of the victim’s loss, replacement value is an
appropriate measure of destroyed property under 18 U.S.C.
§ 3663A(b)(1)(B), where the fair market value is either
difficult to determine or would otherwise be an inadequate or
inferior measure of the value. The panel held that the district
court did not abuse its discretion in using replacement value
to calculate the value of destroyed personal belongings like
clothes, furniture, and home appliances.
The panel held that the district court was not required to
give additional notice of an upward departure, where the
presentence report specifically put the defendants on notice
that an upward departure may apply, and that the district
court did not commit plain error where it upwardly departed
only on grounds stated in the PSR. The panel held that
Kaplan’s 36-month sentence is substantively reasonable. The
panel rejected Strycharske’s contentions that the district court
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES V. KAPLAN 3
made clearly erroneous factual findings, made an
inflammatory analogy that prejudiced his sentencing, and
that his 36-month sentence is substantively unreasonable.
COUNSEL
Ralph Hurvitz (argued), Seattle, Washington, for Defendant-
Appellant Jesse D. Kaplan.
Scott J. Engelhard (argued), Seattle, Washington, for
Defendant-Appellant Daniel James Strycharske.
Charlene Koski (argued), Assistant United States Attorney;
Annette L. Hayes, United States Attorney; United States
Attorney’s Office; for Plaintiff-Appellee.
OPINION
EZRA, Senior District Judge:
Appellants Jesse Kaplan (“Kaplan”) and Daniel
Strycharske (“Strycharske”) appeal their 36-month sentence
of imprisonment and final judgment of restitution in the
amount of $2,771,929 on the ground that the district court
erred by calculating the restitution award using replacement
value instead of fair market value. We have jurisdiction
under 28 U.S.C. § 1291.
We hold that district courts have discretion in calculating
restitution, and that while fair market value generally
provides the best measure to ensure restitution in the full
amount of the victim’s loss, “replacement value” is an
4 UNITED STATES V. KAPLAN
appropriate measure of destroyed property under 18 U.S.C.
§ 3663A(b)(1)(B) where the fair market value is either
difficult to determine or would otherwise be an inadequate or
inferior measure of the value. We affirm the sentences on all
other grounds.
BACKGROUND
This case arises out of Appellants’ quest to manufacture
homemade hash oil and the tragic consequences of that quest.
In the summer of 2013, Kaplan and Strycharske met David
Shultz (“Shultz”) at a marijuana festival where Shultz held
himself out as knowledgeable about the hash oil
manufacturing process. Appellants expressed interest in
producing their own hash oil, so they invited Schultz to move
into their apartment. Subsequently, Schultz and Appellants
started making hash oil in the apartment. On November 5,
2013, butane fumes given off during the hash oil
manufacturing process ignited and exploded. The blast blew
out the apartment’s exterior wall and engulfed significant
portions of the building complex in flames. As a result of the
explosion, six victims suffered severe injuries, and one victim
later died due to complications arising out of her injuries.
On July 30, 2014, a grand jury returned a three-count
indictment against the Appellants. Count 1 charged
Endangering Human Life While Manufacturing Controlled
Substances, in violation of 21 U.S.C. § 858 and 18 U.S.C.
§ 2; Count 2 charged Maintaining a Drug Involved Premises,
in violation of 21 U.S.C. § 856(a)(1) and (b), and 18 U.S.C.
§ 2; and Count 3 charged Manufacturing Hash Oil and
Marijuana, in violation of 21 U.S.C. §§ 841(a)(1),
841(b)(1)(D), 846, and 18 U.S.C. § 2. The Appellants pled
guilty and signed materially identical plea agreements.
UNITED STATES V. KAPLAN 5
At Kaplan’s sentencing, the district court calculated his
total offense level to be 17 and his criminal history category
to be I . The resulting Guidelines range called for a sentence
between 24 to 30 months’ imprisonment. After calculating
Kaplan’s Guidelines range, the district court considered the
§ 3553(a) factors, but found that “an upward departure . . . is
warranted under sentencing guideline [“USSG”] 5K2.0
[rather than a variance under the § 3553(a) factors], as the
aggravating circumstances of the crime are not fully
contemplated by the guidelines.” Accordingly, the district
court sentenced Kaplan to 36 months’ imprisonment.
Likewise, at Strycharske’s sentencing the district court
calculated his Guidelines range to be 24 to 30 months’
imprisonment but sentenced him to 36 months’ imprisonment
by way of an upward departure pursuant to USSG
§ 5K2.0(a)(1)(A).
On October 15, 2015, the district court awarded
restitution in the amount of $2,771,929. On appeal, Kaplan
and Strycharke argue that the proper restitution amount is
$2,731,929. They argue that the $40,000 difference reflects
the district court’s improper use of replacement value in
calculating the value of certain items including clothing,
furniture, and household appliances.
DISCUSSION
A. The Restitution Award
How to measure the value of destroyed property when
calculating a restitution award is a matter of first impression
in this circuit.
6 UNITED STATES V. KAPLAN
We review de novo the legality of a restitution order and
review for clear error the factual findings that support the
order. United States v. Luis, 765 F.3d 1061, 1065 (9th Cir.
2014). If the restitution order “is within the bounds of the
statutory framework, a restitution order is reviewed for abuse
of discretion.” Id. (internal quotation marks and citation
omitted). Whether the Mandatory Victims Restitution Act
(“MVRA”), 18 U.S.C. § 3663A, authorizes a district court to
measure property “value” using its replacement value goes to
the legality of the restitution order itself and is a question of
law; thus the standard of review is de novo.
“Fair market value” refers to “the price that a seller is
willing to accept and a buyer is willing to pay on the open
market.” Fair Market Value, Black’s Law Dictionary (10th
ed. 2014); United States v. Simmonds, 235 F.3d 826, 830 (3d
Cir. 2000) (“‘Market value’ refers to the actual price that the
[property] in question would have commanded on the open
market on the date of destruction.”). “‘Replacement value,’
in contrast, refers to the amount of money necessary to
replace the [property].” Simmonds, 235 F.3d at 830. In most
cases, the replacement value is greater than the fair market
value due to depreciation in value over time of many types of
property. Id. at 830–31.
The MVRA requires a district court to order a defendant
to make restitution to the victim of certain offenses.
18 U.S.C. § 3663A(a)(1). In situations where the return of
property is “impossible,” a district court shall order a
defendant to “pay an amount equal to the greater of the
value of the property on the date of the damage, loss,
or destruction[,] or the value of the property on the date
of sentencing, less [any offsets].” 18 U.S.C.
§ 3663A(b)(1)(B)(i)(I)–(II). However, the statute is silent
UNITED STATES V. KAPLAN 7
about how to value property. United States v. Boccagna,
450 F.3d 107, 114 (2d Cir. 2006). What is clear, however, is
that legislative history and case law demonstrates that the
purpose of the MVRA is to fully compensate victims for their
losses, and to restore victims to their original state prior to the
criminal act. S. Rep. No. 104–179, at 12–13 (1996) reprinted
in 1996 U.S.C.C.A.N. 924; United States v. Gordon, 393 F.3d
1044, 1053 (9th Cir. 2004) (“[W]e are presented with a
statute[,] the primary goal and overarching goal of which is
to make victims of crime whole, to fully compensate these
victims.”) (internal quotation marks and citation omitted).
Indeed, the Supreme Court has stated “that the ordinary
meaning of ‘restitution’ is restoring someone to a position he
occupied before a particular event.” Hughey v. United States,
495 U.S. 411, 416 (1990). Guided by the remedial purposes
underlying the MVRA, other circuits which have addressed
this question have granted district courts a degree of
flexibility in calculating the value of property when
constructing an appropriate restitution award.
For example, the Third Circuit concluded that a district
court did not abuse its discretion in calculating the value of
the victims’ furniture destroyed by a fire under § 3663A using
“replacement value” rather than its “actual value.”
Simmonds, 235 F.3d at 832. The Simmonds court explained
that “[w]hile there is no indication that the destroyed furniture
in this case was ‘unique,’ furniture often has a personal value
to its owners that cannot be captured or accurately estimated
by simply determining the market value of the furniture.” Id.
The Third Circuit held that “when evaluating personal items
of furniture in one’s residence, we find that replacement value
may be an appropriate measure of ‘value’ under
§ 3663A(b)(1). In these circumstances, the market value or
8 UNITED STATES V. KAPLAN
cash value is an inadequate or inferior measure of ‘value.’”
Id.
The Eleventh Circuit affirmed a district court’s use of
replacement value in determining the value of a burned-down
church. United States v. Shugart, 176 F.3d 1373, 1376 (11th
Cir. 1999). The Shugart court held that “‘value,’ as § 3663A
uses that term, contemplates a restitution order based on
replacement cost where actual cash value is unavailable or
unreliable. Whether actual cash value is unavailable or
unreliable is an issue of fact, and a district court’s decision to
use replacement cost is a matter of discretion.” Id. at 1375.
The Eleventh Circuit explained that “[f]or fungible
commodities, value is easy to determine: it’s the actual cash
value, or fair market value, of the item.” Id. However,
“[a]lthough fair market value will often be an accurate
measure of the value of property, it will not always be so.
Where actual cash value is difficult to ascertain—because an
item is unique, or because there is not a broad and active
market for it—replacement cost may be a better measure of
value.” Id.
Two other circuit courts have explicitly adopted this
approach. The Eighth Circuit held that
in certain situations replacement value is the
best measure of a victim’s actual loss,
particularly where the lost property is difficult
to value. Conversely, in situations where the
lost or damaged property is a fungible
commodity with a viable market, we conclude
replacement value is likely not appropriate
because ‘fair market value will . . . provide[]
the most reliable measure of . . . the full loss.
UNITED STATES V. KAPLAN 9
United States v. Frazier, 651 F.3d 899, 908 (8th Cir. 2011)
(remanding because district court did not make a factual
finding as to whether the destroyed home was a unique asset
with intangible value or whether it lacked a viable market
(quoting Boccagna, 450 F.3d at 115) (alteration in original)).
The Second Circuit has chosen to “decline to hold that, as a
matter of law, district courts may only use fair market value
in making the property calculations contemplated by
18 U.S.C. § 3663A(b)(1)(B).” Boccagna, 450 F.3d at 117.
Two additional circuits have implicitly noted, but not directly
held, that the MVRA permits multiple methods of calculating
restitution. United States v. Wilfong, 551 F.3d 1182, 1184 n.2
(10th Cir. 2008) (“We do not hold that the cost to the victim
is the only reasonable form of valuation. In some cases,
replacement cost may be more appropriate.”); United States
v. Gunselman, 643 F. App’x 348, 356 (5th Cir. 2016) (noting
that “other circuits have sanctioned the use of replacement
cost when that measure appears best suited to make victims
whole”). No circuit court has held differently.
This Court now joins our sister circuits in concluding that
fair market value generally provides the best measure to
ensure restitution in the “full amount” of the victim’s loss, but
that “replacement value” is an appropriate measure of
destroyed property under § 3663A(b)(1)(B) where the fair
market value is either difficult to determine or would
otherwise be an inadequate or inferior measure of the value
necessary to make the victim whole. Fair market value will
almost always be an accurate measure of the value of a
fungible commodity with a viable market, like precious
metals, coffee, lumber, currency, wheat, or even marijuana.
See Fungible Goods, Black’s Law Dictionary (10th ed. 2014)
(using coffee and grain as examples); Gonzales v. Raich,
545 U.S. 1, 18 (2005) (explaining that marijuana is “a
10 UNITED STATES V. KAPLAN
fungible commodity for which there is an established, albeit
illegal, interstate market”); Fungible, Webster’s II New
Riverside Univ. Dictionary (1984) (using money and grain as
examples). It is within the district court’s discretion to
determine the proper method of calculating the value of such
property when ordering restitution pursuant to 18 U.S.C.
§ 3663A. However, the method chosen must comport with
the congressional intent to make the victim whole.
Accordingly, it would be an abuse of discretion for a district
court to issue a restitution award that makes a victim more
than whole, such as by awarding a windfall. Finally, the
district court’s determination of the actual value is a question
of fact and should be reviewed for clear error. See Shugart,
176 F.3d at 1375.
This holding comports with the position on an analogous
legal question: how district courts are to measure “loss” for
calculating total offense levels at sentencing. United States
v. Pemberton, 904 F.2d 515, 516–17 (9th Cir. 1990). While
“calculating loss under the guidelines is not necessarily
identical to loss calculation for purposes of restitution,”
United States v. Hunter, 618 F.3d 1062, 1065 (9th Cir. 2010),
the two calculations are often based on similar figures. The
application notes to USSG § 2B1.1, which dictates offense
level enhancements for financial loss, states “[t]he sentencing
judge is in a unique position to assess the evidence and
estimate the loss based upon that evidence.” USSG § 2B1.1
cmt. n.3(C). The application note further explains that in
estimating loss, the sentencing court should use “the fair
market value of the property unlawfully taken, copied, or
destroyed; or if the fair market value is impracticable to
determine or inadequately measures the harm, the cost to the
victim of replacing that property.” Id. § 2B1.1 cmt. n.3(C)(i).
For example, in Pemberton, this court affirmed a district
UNITED STATES V. KAPLAN 11
court’s valuation of a drawing based on a “contract price”
instead of its fair market value in calculating “loss” at
sentencing. 904 F.2d at 517. The court explained,
[t]he district court acted within its discretion
by valuing the drawings as it did. Being
unique, the drawings were not fungible items
for which there was a broad and active
market. In the absence of such a market,
which would have supplied a readily
ascertainable price, the court acted reasonably
in relying upon the [contract].
Id. Similarly, the sentencing judge is in the unique position
to assess the evidence and determine the nature and value of
the property for which restitution will be paid. Where
property is personal or unique, or neither fungible nor easily
sold on a viable market, district courts should be permitted
the discretion to make victims whole by determining an
appropriate measure of value under the circumstances of the
case before them.
Applying the holding to this case, it is clear that the
district court did not abuse its discretion in using replacement
value to calculate the value of destroyed personal belongings
like clothes, furniture, and home appliances. The district
court correctly focused its attention at the restitution hearing
on making the victims whole, in furtherance of the
congressional purpose of the MVRA. The district court
found that the various pieces of property at issue were “very
personal types of items,” and that awarding the fair market
value to purchase someone else’s used personal items would
not make the victim whole. Accordingly, the district court
entered restitution in the amount of $2,771,929, which
12 UNITED STATES V. KAPLAN
reflected the use of replacement value.1 The district court’s
decision reflects this court’s view that replacement value is
preferred where fair market value would provide an
“inadequate or inferior measure of the value necessary to
make the victim whole.” Since the destroyed items were
personal in nature, fair market value would not have
adequately captured the destroyed items’ intangible, and
perhaps sentimental, value to the victims.2 Accordingly, the
district court did not abuse its discretion in using replacement
value to calculate restitution.
B. The Individual Sentences of Imprisonment
Both Appellants contend the district court committed a
procedural error by failing to comply with Federal Rule of
Criminal Procedure 32(h). Because Kaplan and Strycharske
failed to object at sentencing to the adequacy of notice, the
standard of review is plain error. See United States v. Evans-
Martinez, 530 F.3d 1164, 1167 (9th Cir. 2008).
Federal Rule of Criminal Procedure 32(h) states:
Before the court may depart from the
applicable sentencing range on a ground not
identified for departure either in the
1
Only a small portion, approximately $40,000, of the restitution
award involved the personal property items at issue on appeal.
2
The Court notes that in addition to the difficulty in capturing the
intangible and sentimental value of these types of possessions, that even
if there is some type of Internet-based market for used property, the value
varies widely depending on the seller, and it can be simply impracticable
for the district court to ascertain which used piece of property most closely
approximates the item lost by the victim.
UNITED STATES V. KAPLAN 13
presentence report or in a party’s prehearing
submission, the court must give the parties
reasonable notice that it is contemplating such
a departure. The notice must specify any
ground on which the court is contemplating a
departure.
Fed. R. Crim. P. 32(h). “Under the plain language of the
Rule 32(h) . . . [t]he district court itself is required to give
notice of its intent to depart only when the PSR and the
parties’ prehearing submissions fail to identify the ground for
departure.” United States v. Cruz-Perez, 567 F.3d 1142, 1147
(9th Cir. 2009) (internal quotation marks and citation
omitted).
In this case, the PSRs filed for Kaplan and Strycharske
expressly indicated that factors may warrant a departure
pursuant to USSG § 5K2.0(a)(1)(A). Specifically, the PSRs
state that “death, serious bodily injury, and property
destruction was not contemplated in the advisory guideline
range.” Accordingly, the district court was not required to
give additional notice because the PSR specifically put
Kaplan and Strycharske on notice that the court may apply an
upward departure. Their contention that the district court
upwardly departed on alternative grounds is without merit.
The record reflects that the district court articulated reasons
to upward vary pursuant to the § 3553(a) factors, but these
reasons did not form the basis for its upward departure.
Accordingly, since the district court upwardly departed only
on grounds stated in the PSR, the district court did not
commit plain error.
Kaplan further argues that the district court erred by
applying an upward departure pursuant to USSG § 5K2.0. In
14 UNITED STATES V. KAPLAN
this circuit, post-Booker departures may not form the basis of
a procedural error. United States v. Mohamed, 459 F.3d 979,
987 (9th Cir. 2006). Instead, “[t]o the extent that a district
court has framed its analysis in terms of a . . . departure, we
will treat such so-called departures as an exercise of post-
Booker discretion to sentence a defendant outside of the
applicable guidelines range[, and that sentence] is subject to
a unitary review for reasonableness.” Id. The substantive
reasonableness of a criminal sentence is reviewed for abuse
of discretion. United States v. Carty, 520 F.3d 984, 993 (9th
Cir. 2008) (en banc).
Here, Kaplan’s sentence of 36 months imprisonment is
substantively reasonable. The district court noted that the
criminal conduct resulted “in several million dollars in
property damage, a fatality, permanent and disabling and
significant injuries, and interruption in the lives of a number
of people who did nothing wrong other than to live in an
apartment building that three individuals were misusing.” As
noted above, 21 U.S.C. § 858, the statute under which Kaplan
pled guilty, includes as an element of the offense the
“creat[ion of] a substantial risk of harm to human life.” The
creation of a risk is not the same thing as actual harm.
Consequently, the sentence of 36 months is reasonable
because Kaplan’s criminal conduct resulted in significantly
more than just the “creat[ion of] a substantial risk of harm to
human life.” 21 U.S.C. § 858. Instead, his conduct resulted
in actual harm in the form of death and permanent injuries to
a class of victims, and a sentence above the applicable range
was necessary to account for behavior not considered by the
statute or the Guidelines.
UNITED STATES V. KAPLAN 15
C. Strycharske’s Individual Issues
Strycharske argues that the district court made clearly
erroneous findings of fact when it stated the apartment
contained 64 cans of butane and that an open flame was
involved. Strycharske also argues that the district court made
a highly inflammatory analogy that prejudiced his sentencing.
Finally, Strycharske argues that his sentence is substantively
unreasonable. This Court reviews findings of fact for clear
error and the reasonableness of a sentence for abuse of
discretion. United States v. Flores, 802 F.3d 1028, 1047 (9th
Cir. 2015); United States v. Autery, 555 F.3d 864, 871 (9th
Cir. 2009).
It is undisputed that the apartment did not contain 64 cans
of butane; yet, the district court did not make a factual finding
to the contrary, nor rely on the quantity of butane containers
when imposing the sentence. Instead, the district court made
the statement in the phrase of a question, one that Strycharske
ultimately answered and corrected. Nor did the district court
commit clear error in finding that Strycharske acted with
“wanton recklessness [by] having butane canisters actively
involved around open flames.” While the factual basis of the
plea agreement does not describe the existence of an “open
flame,” the fact that the butane gas was “ignited” strongly
implies that a spark or a flame caused the explosion.
Therefore, the district court did not commit clear error
because it was not illogical, implausible, or without support
in inferences drawn from the record that an “open flame”
existed near the butane canisters at the moment of explosion.
Further, the district judge’s “Bering Sea” analogy was
neither extraneous nor inflammatory. At sentencing,
Strycharske argued that his sentence should reflect an
16 UNITED STATES V. KAPLAN
imprisonment range analogous to a drunk driving conviction.
In response, the district court stated:
I would suggest to you that closer analogy is
when you’ve got a boat that you send up to
the Bering Sea, and you weld the doors shut
because it’s going to increase the profitability
of your voyage, and people die because it
sinks. That’s what I think this compares to.
The analogy’s reflection of an individual’s prioritization of
profit at the expense of the safety of others finds support in
the record; Strycharske admitted in his sentencing
memorandum filed with the district court that he, Schultz, and
Kaplan “discussed going into business together” to make hash
oil. It was ultimately the pursuit of that business interest that
led to the explosion. Finally, the “Bering Sea” analogy did
not infect Strycharske’s sentencing to the extent that it
resulted in an unfair process or undermined the district
court’s application of the § 3553(a) factors. To the contrary,
the district court’s articulation of the § 3553(a) factors and
ultimate upward departure pursuant to USSG § 5K2.0
demonstrates that the judge made “an individualized
assessment,” Carty, 520 F.3d at 994, that led the district court
to impose a sentence of 36 months’ imprisonment.
Finally, the district court did not abuse its discretion in
sentencing Strycharske to an unreasonable imprisonment.
The district court correctly calculated the applicable range,
which called for imprisonment between 24 to 30 months.
The district court fully articulated its reasons for an upward
variance using the § 3553(a) factors. Specifically, the court
noted that “what moves the court is the loss of life, the
permanently-disabling and significant injuries that people
UNITED STATES V. KAPLAN 17
received . . . therefore, I take the nature and circumstances of
the offense to be highly significant and serious.” Despite
giving detailed reasons to justify an above the guideline range
sentence pursuant to the § 3553(a) factors, the district
ultimately applied an upward departure “based upon the fact
that the applicable sentencing guidelines did not consider the
extreme harm done to the victims, including the total
destruction of property, the permanent debilitating injuries,
and the loss of life as a result of injuries received in the
incident.” Given these circumstances, the district court did
not abuse its discretion in sentencing Strycharske to 36
months’ imprisonment, six months above the applicable
range.
For these reasons, we affirm the district court’s sentences
of imprisonment and award of restitution.
AFFIRMED.