UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 97-20479
Summary Calendar
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
CHONG N.CHO,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Texas
March 5, 1998
Before DUHÉ, DeMOSS & DENNIS, Circuit Judges.
JOHN M. DUHÉ, JR., Circuit Judge:
Chong Cho (“Cho”) appeals her sentence after pleading guilty
to two counts of trafficking in counterfeit goods. She contends
that the district court erred in applying United States Sentencing
Guidelines (“U.S.S.G.”) §§ 2B5.3 and 2F1.1 to calculate her
sentence. For the following reasons, we find no error in the
district court’s application of the Sentencing Guidelines and
therefore affirm Cho’s sentence.
BACKGROUND
Cho and her husband owned a business in Houston, Texas, called
C&S Design Handbag and Luggage (“C&S”) from around 1992 to 1996.
United States Customs agents began surveillance at C&S in 1995
based on information that C&S had received counterfeit merchandise
from a company in Philadelphia. The agents subsequently received
permission to search two nearby business suites used as storage
space by C&S. The agents found counterfeit merchandise in each
suite valued at over $99,000 and $27,000, respectively.
In May, 1996, a confidential informant went into C&S and
talked to Cho about purchasing counterfeit goods. The CI
subsequently purchased two counterfeit Dooney & Bourke handbags and
one counterfeit Louis Vuitton handbag for $50. On June 12, 1996,
the agents executed a search warrant at C&S. They seized 9,257
pieces of counterfeit merchandise with an estimated retail value
between $76,000 and $125,000.
Cho pled guilty to two counts of trafficking in counterfeit
goods in violation of 18 U.S.C. § 2320(a). The district judge
sentenced Cho under U.S.S.G. § 2B5.3, which mandates a base offense
level of six. The judge determined that $123,921 was the retail
value of the counterfeit merchandise for which Cho could be held
accountable. Because the retail value of the “infringing items”
exceeded $2,000, § 2B5.3(b)(1) directed the judge to “increase
[Cho’s offense level] by the corresponding number of levels from
the table in § 2F1.1 (Fraud and Deceit).” The judge then applied
the above amount ($123,921) to the table in § 2F1.1 and increased
Cho’s offense level by seven levels. See U.S.S.G. §
2F1.1(b)(1)(H). Because the district judge awarded Cho a two-level
reduction for acceptance of responsibility, her total offense level
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was eleven. The court sentenced Cho to two concurrent fourteen-
month terms of imprisonment, two concurrent three-year terms of
supervised release, restitution in the amount of $6,633.95, and a
special assessment of $200. The court then granted Cho’s motion
for leave to file an out-of-time appeal.
DISCUSSION
I.
U.S.S.G. § 2B5.3, “Criminal Infringement of Copyright or
Trademark,” directs a sentencing court to increase a defendant’s
offense level by the corresponding number of levels from the Fraud
and Deceit table in § 2F1.1, but only “[i]f the retail value of the
infringing items exceed[s] $2,000.” The Fraud and Deceit table in
§ 2F1.1, however, is calibrated in terms of “loss,”1 rather than
“retail value.”
Cho argues that, once the infringing items cross the $2,000
“retail value” threshold of § 2B5.3, a sentencing court should
then, according to the plain language of § 2F1.1(b)(1),2 calculate
the “loss” resulting from Cho’s trademark infringement. That
figure (“loss”) and not the retail value of the infringed items,
Cho contends, should determine her enhancement under the § 2F1.1
table.
The district court disagreed. Relying on § 1B1.5, the
1
“Loss” is defined in the Application Notes to U.S.S.G. §
2B1.1 as “the value of the property taken, damaged, or destroyed.”
U.S.S.G. § 2B1.1, comment. (n.1).
2
The prefatory sentence to the table contained in §
2F1.1(b)(1) reads: “If the loss exceeded $2,000, increase the
offense level as follows....”
3
Commentary to § 2B5.3, and our decision in United States v. Kim,
963 F.2d 65, 67-8 (5th Cir. 1992), the district judge found that
the reference in § 2B5.3 to the § 2F1.1 table refers only to the
dollar amounts and their corresponding levels and does not
incorporate the subsection’s reliance on “loss.” The court
therefore used the retail value of the counterfeited items in
applying the § 2F1.1 table and enhancing Cho’s offense level.
II.
We review the district court’s interpretation of the
Sentencing Guidelines de novo and its application of the guidelines
to the facts for clear error. United States v. Shano, 955 F.2d
291, 294 (5th Cir. 1992); United States v. Singleton, 946 F.2d 23,
24 (5th Cir. 1991). A sentence imposed under the guidelines will
be upheld on appeal unless the defendant demonstrates that the
sentence was imposed in violation of the law, was imposed due to an
incorrect application of the guidelines, or was outside the
applicable guideline range and was unreasonable. See Shano, 955
F.2d at 294.
The Background Commentary to § 2B5.3 strongly supports the
Government’s position that the retail value of the infringing items
should determine the § 2F1.1 enhancement:
This guideline treats copyright and trademark
violations much like fraud. Note that the
enhancement is based on the value of the
infringing items, which will generally exceed
the loss or gain due to the offense.
U.S.S.G. § 2B5.3, comment. (backg’d)(emphasis added). Cho argues
that the Background Note is “simply a clarification of § 2B5.3 and
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emphasizes that the sentencing court is to use the retail value of
the infringing items in order to determine whether it must enhance
the offense level according to § 2F1.1(b)(1).” Cho misreads the
guideline Commentary. The Background Note does not merely alert
the sentencing court that a possible reference to the § 2F1.1 table
depends on the retail value of the counterfeited items. Instead,
the Note explicitly states that the enhancement itself will be
based on retail value. The Note even takes pains to observe that
this value will generally exceed the loss or gain caused by the
infringement. Cho’s reading of the Background Note would transform
it into misleading surplusage.
Furthermore, U.S.S.G. § 1B1.5(b)(2) explains that
[a]n instruction to use a particular
subsection or table from another offense
guideline refers only to the particular
subsection or table referenced, and not to the
entire offense guideline.
Cho maintains that the reference in § 2B5.3 is in fact to the
entire subsection in which the table is included, i.e., §
2F1.1(b)(1); thus, § 2B5.3 incorporates by reference the reliance
on “loss” mandated by the prefatory sentence in § 2F1.1(b)(1). See
supra note 2.
Again, Cho misreads the guidelines. Section 2B5.3(b)(1) makes
explicit reference, not to § 2F1.1(b)(1) as a subsection, but
instead to “the table in § 2F1.1.”3 Section 1B1.5(b)(2)
3
We recognize that the Eighth Circuit, in United States v.
Lamere, 980 F.2d 506, 511-12 (8th Cir. 1992), may have reached a
contrary conclusion. Language in Lamere could be taken to mean
that a reference to “the table in 2F1.1" is actually a reference to
the entire subsection (§ 2F1.1(b)(1)) in which the table is
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specifically foresees that one guideline section might refer only
to a table from another section; in such a case, § 1B1.5 instructs
the sentencing court to refer, as the district court correctly did
here, only to the “table referenced.” Thus, the reference in §
2B5.3 to “the table” in § 2F1.1, combined with the explicit
adoption of “retail value” in the § 2B5.3 Background Commentary as
the measure of enhancement, convinces us the Government’s
interpretation is the correct one.
Cho makes an ingenious argument in reliance on United States
v. Kim, 963 F.2d 65 (5th Cir. 1992), which, unfortunately for Cho,
studiously disregards the holding and import of Kim. In Kim, this
Court held that the proper measure for an enhancement under §
2B5.4(b)(1)4 was the value of the counterfeited items, and not the
value of the genuine items. Id. at 68. We further found, however,
that it was not clear error for the district court to rely on the
contained. (“In referring to Application Note 7, the district court
did not consider characteristics in addition to those contained in
§ 2F1.1(b)(1)--the “table.”). Lamere, 980 F.2d at 512 (emphasis
added). We disagree with that statement only insofar as it would
require a court applying § 2B5.3 to recalculate “loss” for the §
2F1.1 table, when the court had already calculated “retail value of
the infringing items” in § 2B5.3. In our view, the Background
Commentary to § 2B5.3 forecloses such an interpretation of the
guidelines. See discussion supra. We note, however, that Lamere
simply held that it was not error for the district court to refer
to the Application Notes under § 2F1.1 for guidance in interpreting
the word “loss.” See Lamere, 980 F.2d at 512. We also note that
Lamere involved the interpretation of a different guideline
section, § 2B5.1 (“Offenses Involving Counterfeit Bearer
Obligations of the United States”). See Lamere, 980 F.2d at 511.
4
Section 2B5.4 was deleted by consolidation with § 2B5.3,
effective November 1, 1993. See U.S.S.G. § 2B5.4 [Deleted],
historical note (1995). Section 2B5.4 is identical to the present
§ 2B5.3. Cf. U.S.S.G. § 2B5.4 (1990) with § 2B5.3 (1995).
6
retail value of the genuine items in assessing the retail value of
the counterfeit items; such evidence was relevant to the
counterfeit items’ value, particularly given testimony as to the
difficulty of calculating the “retail price of counterfeit items.”
Id. at 69.
Cho seeks to rob Kim of its precedential value by misstating
its holding. Cho asserts that, in Kim, we were concerned merely
with determining whether the value of the infringing items exceeded
the $2,000 threshold of § 2B5.4 (now § 2B5.3); thus, claims Cho,
Kim says nothing about the application of the § 2F1.1 table. Cho
adds that the Court’s reference to the Commentary to § 2F1.15 was
simply to support its interpretation of § 2B5.4, and was not meant
as an interpretation of § 2F1.1 itself. Id. at 69-70. Common
sense and the clear implications of Kim counsel against Cho’s
reading.
It is patently clear that the Kim court was concerned with
calculating “retail value” not to determine whether or not to apply
the § 2F1.1 table, but instead in order to apply the table itself.
The Court stated:
Kim appeals his sentence, contending that the
district court erroneously increased his
offense level by using the retail value of the
items being infringed--rather than the retail
value of the counterfeit (infringing) items.
Kim, 963 F.2d at 67 (emphasis added). Kim was complaining about an
5
See, e.g., U.S.S.G. § 2F1.1, comment. (n. 7)(“The amount of
loss need not be precise.... The court need only make a reasonable
estimate of the loss, given the available information);
(n.8)(“Where the market value is difficult to ascertain..., the
court may measure loss in some other way....).
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“erroneous increase” to his offense level--which presupposes
application of the § 2F1.1 table--and not about the district
court’s decision to use the table at all.
Further, the Court cited the Second Circuit’s decision in
United States v. Larracuente, 952 F.2d 672 (2nd Cir. 1992) for the
proposition that the district court there, given the similarity of
bootleg tapes to the actual merchandise, “correctly used the retail
value for genuine merchandise to determine the increase in the
defendant’s offense level under section 2B5.3.” Kim, 963 F.2d at
69 (emphasis added). Again, the Kim court was interested, as was
the Larracuente court, in determining retail value for purposes of
applying the 2F1.1 table -- not, as Cho claims, for assessing
whether the § 2B5.3 $2,000 threshold had been met.
Finally, and perhaps most convincing, are the monetary amounts
addressed in Kim. The district court had determined that the
retail value of the items seized from Kim was $195,400, based on
the retail price of genuine merchandise. Kim, 963 F.2d at 68. Kim
argued that there was sufficient evidence presented at sentencing
from which the district court could have calculated the retail
value of the counterfeit items. Id. at 70. The Court found, to
the contrary, that there was insufficient evidence of the price of
the counterfeit items, and that the district court was therefore
not clearly erroneous in relying on the price of genuine articles.
Id. Specifically referring to the lack of evidence of both price
and quantity of counterfeit Louis Vuitton handbags, the Court
stated:
8
Kim has not shown that the evidence regarding
the handbags is sufficient to reduce the
amount of the counterfeit merchandise by at
least $75,400, the amount necessary to
decrease his offense level by one. See
U.S.S.G. § 2F1.1(b)(1)(H).
Id. (emphasis added).
In our view, this statement by the Kim court establishes
beyond any doubt that the court was concerned with calculating
retail value for comparison with the dollar amounts and
corresponding level adjustments found in the § 2F1.1 table. Common
sense compels this conclusion as well. The Court was dealing with
an initial retail value assessment by the district court of over
$195,000. It found that assessment was not clearly erroneous
based, in part, on its finding that Kim could not produce
sufficient evidence of the infringing items’ value to reduce the
total value by some $75,000, the amount necessary to move Kim one
level down on the § 2F1.1 table. If the Kim court had been, as Cho
insists, concerned with the $2,000 threshold amount in § 2B5.3, a
discussion of monetary values in excess of $195,000 and $75,000
would have been ridiculous at best. Contrary to Cho’s assertions,
Kim stands squarely for the proposition that the retail value of
the infringing items determines the § 2F1.1 enhancement.
Although not cited by either party, our decision in United
States v. Thomas, 973 F.2d 1152 (5th Cir. 1992), could be read to
support Cho’s argument. Thomas involved the sentencing of a
defendant who had been convicted of illegal activities involving
the alteration of motor vehicle identification numbers, in
violation of 18 U.S.C. §§ 511-12, 2321-22. Id. at 1155. The
9
Sentencing Guideline applicable to those offenses -- § 2B6.1 -- is
in pertinent part identical to § 2B5.3:
If the retail value of the motor vehicles or
parts involved exceeded $2,000, increase the
offense level by the corresponding number of
levels from the table in § 2F1.1 (Fraud and
Deceit).
U.S.S.G. § 2B6.1(b)(1). The Thomas court held that the district
court properly used “loss,” rather than retail value, in applying
§ 2B6.1 to § 2F1.1. Thomas, 973 F.2d at 1159.
One could read Thomas as conflicting with Kim. We need not
distinguish Thomas here, however. Following Thomas, Application
Note 2 was added to § 2B6.1:
The “corresponding number of levels from the
table in § 2F1.1 (Fraud and Deceit),” as used
in subsection (b)(1), refers to the number of
levels corresponding to the retail value of
the motor vehicle or parts involved.
U.S.S.G. § 2B6.1, comment. (n.2), effective November 1, 1993 (see
Appendix C, Amendment 482)(1995). That amendment seems to us to
remove any doubt Thomas might have cast on Kim.
CONCLUSION
For the foregoing reasons, we find that the district court
correctly applied U.S.S.G. §§ 2B5.3 and 2F1.1 in calculating Cho’s
sentence and we therefore AFFIRM.
AFFIRMED.
10