United States v. Goodwin, Darrel A.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 1, 2002 Decided January 31, 2003

No. 01-3070

United States of America,
Appellee

v.

Darrel A. Goodwin,
Appellant

Appeal from the United States District Court
for the District of Columbia
(No. 99cr00122-01)

Beverly G. Dyer, Assistant Federal Public Defender, ar-
gued the cause for appellant. With her on the briefs was A.
J. Kramer, Federal Public Defender.

Thomas S. Rees, Assistant U.S. Attorney, argued the cause
for appellee. With him on the brief were Roscoe C. Howard,
Jr., U.S. Attorney, and John R. Fisher, Mary-Patrice Brown,
and Kenneth F. Whitted, Assistant U.S. Attorneys.

 Before: Randolph and Rogers, Circuit Judges, and
Williams, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge
Williams.

Williams, Senior Circuit Judge: In early 1999 Darrel
Goodwin was arrested by agents from the Drug Enforcement
Administration ("DEA") who had just sold him cocaine. Al-
though testimony suggested that at the time the market price
for a single kilogram of cocaine was above $27,000, Goodwin
had made a deal to buy three kilograms at a unit price of
$20,000 each. On the day of his arrest, Goodwin paid about
$20,000 in cash and $1,500 worth of heroin toward the pur-
chase of the first two kilograms, with the balance to be paid
on the second kilogram once he had sold the drugs. In
addition, Goodwin agreed to come back the following day to
pay for and collect the third kilogram.

Goodwin argues that his case squarely fits the language of
Application Note 141 to s 2D1.1 of the United States Sentenc-
ing Guidelines ("U.S.S.G."), which under some circumstances
allows (but doesn't require) a departure in a "reverse sting"
(a drug sale by government agents to the defendant). Specif-
ically, the Note authorizes departure where the agent "set a
price ... that was substantially below the market value ...,"
leading the defendant to purchase a "significantly greater
quantity" than he otherwise could have. At sentencing the
district court rejected the argument as unsupported by the
evidence. We cannot say that the district court erred in
denying the departure, and accordingly affirm.

* * *

In January 1999 DEA agents began working with a confi-
dential informant who introduced them to Goodwin. On three
occasions Goodwin sold the informant and DEA Special Agent
Kenneth Abrams small amounts of heroin (totaling 56.8
grams), "fronting" Abrams and the informant on two occa-

__________
1 As renumbered effective November 1, 2002 from the former
but identically worded Application Note 15.

sions. During one of these transactions, Goodwin sold $3,500
worth of heroin for only $2,450, with the remainder to be paid
later, and another time he sold $2,620 worth, requiring only
$1,500 up front.

At some point during these transactions Abrams and Good-
win began discussing the possibility of working together to
buy cocaine. At first, they discussed a transaction in which
they would split one kilo, toward which Goodwin would con-
tribute $10,000. Abrams told Goodwin he had a source that
could sell cocaine for about $24,000 per kilogram and that the
source could supply larger volumes as well. Goodwin said
that he--along with an unnamed partner--could come up
with $37,000 toward a deal.

In early February Abrams brought Goodwin to meet Spe-
cial Agent Robert Valentine, who was posing as the source of
the cocaine. Valentine explained that he could sell Abrams
and Goodwin five kilos for $100,000. In Goodwin's presence,
Agent Abrams gave Valentine $10,000 as a fake down pay-
ment; the record is obscure on the role of this payment, and
Goodwin makes no claim that it was a part of the payment
made for his drugs in the offense of conviction. Goodwin told
the agents that he could come up with about $15,000 and "his
people" could come up with about $24,000.

A few days later, Goodwin met with Agents Abrams and
Valentine at a hotel. Goodwin said that he only had about
$20,000 but that he was still interested in buying the cocaine.
Valentine asked Goodwin if he had any heroin to trade for
cocaine. Goodwin produced 14 grams of heroin, worth about
$1,500.

After sampling the cocaine and approving its quality, Good-
win agreed to purchase three kilos for $20,000 each. He paid
$19,870 for the first kilogram, and gave the $1,500 worth of
heroin as a down payment on the second, with further pay-
ment to come from street sales of the purchased cocaine.
Goodwin was to return for the third kilogram the following
day. But as he left the room with the first two kilos, officers
arrested him.

 Goodwin pled guilty to possession of 500 grams or more of
cocaine with the intent to distribute, in violation of 21 U.S.C.
ss 841(a)(1) and 841(b)(1)(B)(ii). At Goodwin's sentencing
hearing, Agent Abrams testified that the price of cocaine at
that time was $26,000 or $27,000 per kilo in New York or
Miami, and that prices in Washington, D.C. were higher than
in New York or Miami. Abrams testified that the $20,000 per
kilo price agreed to by Goodwin reflected a negotiated bulk
discount. Goodwin argued that the court should use its
discretion to grant a downward departure because the agents
had induced his purchase with a price that was "substantially
below the market value." U.S.S.G. s 2D1.1, Application Note
14.

Although the terms in which the district court judge dis-
posed of Goodwin's Application Note 14 theory are not crystal
clear, a fair reading is that he rejected both the claim that the
sale was on terms substantially below market and the claim
that any below-market pricing induced a purchase of higher
volume--both of which are necessary for a Note 14 depar-
ture. On the first element, for example, he said that he could
not "find that either the second or third kilograms should be
unattributable to Mr. Goodwin," emphasizing the "substantial
down payment" and noting that Goodwin "was expected,
obviously, to pay the rest. He wasn't given these drugs for
free." The latter phrase ("for free") strikes us as simply a
hyperbolic way of expressing the idea that Goodwin had not
shown the terms to be markedly more favorable than could be
expected in the market. In addition, the district court found
that the deal "was not induced by" the price.

For sentencing purposes the district court assigned Good-
win a base offense level of 28, which covers the range from 2
to 3.5 kilograms of cocaine (or its equivalent under the
Guidelines' drug equivalency table). U.S.S.G. s 2D1.1(c) &
Application Note 10. It attributed the entire three kilograms
of cocaine to Goodwin, and may also have included the 70.8
grams of heroin he sold the agents. But as the 70.8 grams of
heroin converts to only .354 kilos of cocaine, it did not affect
the offense level even if included.

 Goodwin presents two arguments for reversal. First, he
argues that the court erred because the price for the first
kilogram of cocaine--about $20,000 rather than upwards of
$27,000--was artificially low and triggered the court's power
to depart. Second, he says that the credit terms for the
second kilogram were overly generous, because the agents
didn't have enough knowledge of Goodwin's ability to profit-
ably distribute large amounts of cocaine, not to mention his
reliability; the credit terms were thus the equivalent of lower
prices, and therefore permit departure.

Finding no clear error in the finding that Goodwin failed to
show that the terms were substantially more favorable than
in the market generally, we affirm.

* * *

Congress has devised a "trichotomy" for review of district
court resolution of Guidelines issues: "[P]urely legal ques-
tions are reviewed de novo; factual findings are to be af-
firmed unless 'clearly erroneous'; and we are to give 'due
deference' to the district court's application of the guidelines
to facts." United States v. Kim, 23 F.3d 513, 517 (D.C. Cir.
1994) (citing 18 U.S.C. s 3742(e)); see also Buford v. United
States, 532 U.S. 59 (2001); United States v. Sammoury, 74
F.3d 1341, 1343-44 (D.C. Cir. 1996). There is some ambigui-
ty whether the district court's decision not to apply Note 14
involved a finding of fact (and thus should be reviewed under
the "clearly erroneous" standard) or an "application of the
guidelines to the facts" (and thus should be reviewed under
the intermediate "due deference" standard). Certainly the
line between the two can be unclear. Compare, e.g., United
States v. Brooke, 308 F.3d 17, 20-21 & n.4 (D.C. Cir. 2002)
(using clear error standard to review whether home confine-
ment would be "equally efficient as" incarceration), with Kim,
23 F.3d at 517 (using due deference standard to review
whether defendant's actions constituted "more than minimal
planning"). Here, however, both parties assume that the
standard is one of clear error. We accordingly apply that
standard, though noting that we would reach the same out-

come if we used "due deference." The defendant bears the
burden of proving by a preponderance of the evidence that he
is eligible for a downward departure. See, e.g., United States
v. Sachdev, 279 F.3d 25, 28 (1st Cir. 2002).

Application Note 14 states:

If, in a reverse sting (an operation in which a govern-
ment agent sells or negotiates to sell a controlled sub-
stance to a defendant), the court finds that the govern-
ment agent set a price for the controlled substance that
was substantially below the market value of the con-
trolled substance, thereby leading to the defendant's
purchase of a significantly greater quantity of the con-
trolled substance than his available resources would have
allowed him to purchase except for the artificially low
price set by the government agent, a downward depar-
ture may be warranted.

U.S.S.G. s 2D1.1, Application Note 14. The sentencing
court's discretion to grant a departure therefore requires a
price that both is "substantially below the market value" and
induces the defendant to purchase a "significantly greater
quantity" than he otherwise could. See id.

We pause to observe three ambiguities in the Note. First,
it appears to see a low price as an inducement only in the
sense that it might enable a potential buyer to stretch his
resources farther, i.e., it would increase the quantity that a
buyer is able to buy. Thus it seems to overlook the conven-
tional notion of price elasticity--the effect on the quantity
that a buyer, even one with ample resources, would be willing
to buy. After all, a person who is willing to buy only ten
units of a good at a unit price of $100, even though he has the
resources to buy many more, might well up his purchase if
the goods were offered at a unit price of $50. The Guidelines
seem to offer no protection to the buyer whose willingness to
buy is drastically affected by a discount, so long as the drugs
would have been within his ability to pay even if offered at
market rates.

 Second, the Note's focus on how much a buyer's "available
resources" would allow him to purchase could be read to skew
the role of credit. Credit transactions allow a buyer to
purchase more drugs than if he were required to pay cash up
front; if one read "available resources" to encompass only
assets available for immediate transfer, a broad array of
transactions at market terms would qualify for the departure.
We do not read the term "available resources" so narrowly.
Rather, we assume that access to credit on terms prevailing
in the market, is, like cash, one of a buyer's "available
resources." Thus a defendant cannot simply assert that any
quantity purchased on credit should be counted as more than
his "available resources" would allow.

Third, the Note says nothing explicit on how a court is to
determine whether a purchase increment induced by discount
pricing is "significant[ ]." While we would not hazard a com-
plete definition of "significant" in this context, it must at least
foreclose the use of Note 14 where the increase due to
favorable terms had no effect on sentencing at all--a matter
that turns largely on the Guidelines' "brackets" for drug
quantities. (A judge whose sentencing within a bracket is
influenced by intra-bracket variations of course needs no
special authorization to make adjustments for any effect of
discounts.) Here the most relevant divide is at two kilograms
of cocaine (or its equivalent). At or above two kilos (all the
way up to 3.5), Goodwin would be at Level 28, which the
district court used. Below two kilos (even by a hair, all the
way down to 500 grams), he would be at Level 26. See
U.S.S.G. s 2D1.1(c). Thus it makes no difference whether he
purchased two kilograms or three; relief would be proper
only if the alleged discount played a role in luring him up to
two (or its equivalent).

The district court reviewed the evidence and determined
that Goodwin had received a discounted bulk-rate price of
$20,000 per kilogram. Abrams had testified that the price
reflected a quantity discount. While Goodwin's counsel ques-
tioned Abrams about the price of individual kilograms, he did
not elicit any testimony from him (or offer any other evi-
dence) to suggest that $20,000 per kilo was not within the

normal market range for a two-or three-kilo delivery. A brief
review of appellate decisions in narcotics cases suggests that
volume discounts are indeed available in the drug world,
much as in lawful markets. See, e.g., United States v.
Thomas, 284 F.3d 746, 754 (7th Cir. 2002); United States v.
Pressler, 256 F.3d 144, 151 (3d Cir. 2001); United States v.
Wilson, 244 F.3d 1208, 1211 (10th Cir. 2001). While the
government did not offer affirmative evidence that the bulk
discount here--roughly 25% off the per-kilo price for a single
kilo--conformed to market realities for a two-or three-
kilogram deal, it was Goodwin who bore the burden of
showing that Note 14 applied. See Sachdev, 279 F.3d at 28.

Nor can we say that the credit terms--allowing Goodwin to
walk away with $40,000 worth of cocaine while paying only
$19,870 in cash and $1,500 in heroin--change this analysis.
We agree with Goodwin that overly generous credit terms can
be the equivalent of a reduction in a cash price for purposes
of Note 14. But we see no clear error here. "Fronting," i.e.,
a sale on credit with the balance expected to be repaid from
street sale revenues, appears, like volume discounts, to be a
common practice in the drug market. See, e.g., United
States v. Ramsey, 165 F.3d 980, 982 (D.C. Cir. 1999); United
States v. Tarantino, 846 F.2d 1384, 1395 (D.C. Cir. 1988).
Indeed, Goodwin himself fronted drugs to Agent Abrams on
at least two occasions, despite knowing little about him.

Thus the question is only whether the relationship between
Goodwin and the agents here was such that credit on this
scale would not have been available to Goodwin in the actual
drug market. He asserts it would not:

The agents had no knowledge of Goodwin's circum-
stances, contacts, drug distribution network, or his expe-
rience dealing cocaine, and they did not require Goodwin
to confirm when he would be able to repay them the
remaining $18,500. No experienced drug seller would
have fronted a first-time buyer a kilogram of cocaine in
exchange for such a small amount of heroin without such
knowledge. Most large scale drug sellers would require

 cash, not heroin, in payment. The agents were also
likely aware of Goodwin's heroin addiction, and no expe-
rienced seller of drugs would have engaged in this trans-
action with a heroin addict. For these reasons, the
agents extended credit terms for the second kilogram
that never would have been available in an actual drug
market.

Appellant's Br. at 13.

Perhaps this is true. But the paragraph notably fails to
cite any supporting evidence for its view of market behavior.
Moreover, the only case cited by Goodwin as manifesting such
a view of the drug market, United States v. Panduro, 152
F.Supp. 2d 398, 407 (S.D.N.Y. 2001), involved a dealer front-
ing more than 15 times the amount of cocaine fronted in this
case, and noted that the question of overly generous credit
terms was a "fact intensive inquiry." Id. at 407.

Furthermore, counsel rather clouds the facts with his de-
piction of the agents' virtually throwing drugs at an unknown
purchaser. First, while the agents had had no cocaine deal-
ings with Goodwin, they had had two successful frontings of
heroin (although, to be sure, on a smaller scale and with
Goodwin the one who extended credit). And while Goodwin
says that the agents were aware of his heroin addiction (and
suggests that seasoned sellers would not deal with such an
addict), he promised them he would turn up with tens of
thousands in cash and he came through with nearly $20,000.
This is hardly behavior consonant with Goodwin's self-
depiction as a person unfitted by addiction for serious drug
dealing. In addition, he certainly presented himself as an
experienced cocaine dealer, telling the informant that he was
"continuing" to sell crack cocaine but was unhappy with the
prices he was paying in light of the quantities he was pur-
chasing. And before the delivery was final, he sampled the
cocaine and commented on its quality, which was a sign of
experience (real or feigned). Of course here we encounter a
general difficulty with Application Note 14: if the terms
offered are "substantially" below market levels, one might
expect the buyer--unless a real neophyte--to smell a rat.

But we do not rely on that problem. Here Goodwin has
simply failed to offer adequate proof of a material deviation
from market terms.

We thus find no clear error in the district court's conclusion
that Goodwin failed to prove that the agents set a price
(credit terms included) that was "substantially below the
market value" of the drugs.

The judgment of the district court is

Affirmed.