United States Court of Appeals
For the First Circuit
No. 06-2138
UNITED STATES OF AMERICA,
Appellee,
v.
DAVID McCOY,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Michael A. Ponsor, U.S. District Judge]
Before
Boudin, Chief Judge,
Torruella and Lynch, Circuit Judges.
Jeanne M. Kempthorne on brief for appellant.
Mark T. Quinlivan, Assistant United States Attorney, and
Michael J. Sullivan, United States Attorney, on brief for appellee.
November 27, 2007
BOUDIN, Chief Judge. David McCoy appeals from the 46
month prison sentence imposed on him after he pled guilty to two
counts of wire fraud, 18 U.S.C. § 1343 (2000), and one count of
conspiracy to launder money, id. §§ 1956(h), 1957. In substance,
McCoy and his fellow conspirators engaged in a scheme by which
fraudulent mortgage loans were used to sell property to purchasers.
After purchasing a condemned or nearly uninhabitable
property in Springfield, Massachusetts, usually at auction, the
conspirators would arrange for a grossly inflated appraisal of the
property; obtain a mortgage loan--based on fraudulent documentation
and the fraudulent appraisal--for an unsophisticated buyer with low
income, bad credit or both; and then sell the property to the buyer
and split the profits among the participants in the scheme
(including the appraiser, the mortgage broker, the real estate
lawyer, etc.).
Those who bought the homes were left with artificially
inflated mortgages and usually defaulted; the banks were generally
unable to recoup the full value of their loans because the
foreclosed homes were worth less than the false appraisals had
indicated. The scheme unraveled and McCoy, who had acted as one of
the mortgage brokers, was charged with twelve counts of wire fraud
as to transactions occurring mostly in 2000 and 2001. He was also
charged with conspiracy to launder the proceeds of the scheme.
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Pursuant to a plea agreement, McCoy pled guilty in
January 2006 to two of the fraud counts and to the money laundering
count. As part of the plea agreement, the government agreed to
request a prison sentence within the range appropriate under the
sentencing guidelines; the agreement also set forth both parties'
positions on some (but not all) of the issues expected to arise in
applying the guidelines to the case. On some of these issues the
parties agreed but others were disputed. The plea bargain also
included a (partial) waiver of McCoy's right to appellate review.
In July 2006, the district judge sentenced McCoy to 46
months in prison.1 A driving element under the guidelines is the
magnitude of the loss intended or inflicted. U.S.S.G. §
2B1.1(b)(1) (2001). The district judge calculated the estimated
loss to the banks by subtracting from the amounts of the
fraudulently obtained mortgage loans the amounts that the
conspirators had paid for the properties--treating the latter as a
proxy for their value as security. He rejected McCoy's position
that the subtracted figure should be the often higher amounts
recovered by the banks through foreclosure or other means.
1
The district judge used the 2001 version of the sentencing
guidelines, which (according to the presentence report) were in
effect during the last offense for which McCoy was convicted (the
money laundering) and were more favorable to McCoy than those in
effect at sentencing. See generally U.S.S.G. § 1B1.11. McCoy says
that on remand or by collateral attack, he wishes to argue for use
of the 2000 version, challenging the premise that the offense
continued after the effective date of the 2001 guidelines; we note
only that this may contradict the indictment to which he pled.
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The district judge, using his loss formula rather than
McCoy's, computed the total loss figure at between $400,000 and
$1,000,000--one of the brackets under the guideline. Combined with
McCoy's criminal history level--which the judge reduced from III to
II on the grounds that higher level "overstated" the nature of the
prior criminal history--that loss value corresponded to a final
sentencing range of 41 to 51 months. McCoy's sentence of 46 months
fell in the middle of that range.
After McCoy filed a timely appeal, this court noticed
that the district judge appeared to have made a mathematical error
in computing the amount of loss--even under the formula he had
articulated. In supplemental memoranda we requested, both parties
agreed; the district judge's formula, correctly computed, would
have resulted in a loss slightly under $ 400,0002 and a sentencing
range of 33 to 41 months. So on top of McCoy's original ground of
appeal, we have to decide what to do about the mathematical error.
Before reaching the merits we must consider whether McCoy
waived his right to bring this appeal. In this circuit, an appeal
waiver is enforceable if the defendant knowingly and voluntarily
agreed to its terms and enforcement would not result in miscarriage
of justice. United States v. Teeter, 257 F.3d 14, 24-26 (1st Cir.
2
The parties do not agree on a precise figure, primarily due
to ambiguity over which properties the district judge intended to
include in his aggregate amount; but all agree that the corrected
figure is within the $200,000 to $400,000 bracket. U.S.S.G. §
2B1.1(b)(1)(G).
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2001). The parties debate whether these requirements are met here,
but it is not necessary to reach the enforceability question
because the waiver provision does not apply.
Even a knowing and voluntary appeal waiver only precludes
appeals that fall within its scope. See United States v. Behrman,
235 F.3d 1049, 1052 (7th Cir. 2000). Waivers of appeal vary
considerably in their language and the scope of the waiver is
simply a matter of what the parties agreed to in the particular
case. We turn to the language of the plea agreement between McCoy
and the government.
Defendant knowingly and voluntarily waives his
right to appeal or collaterally challenge: . .
. (2) The adoption by the District Court at
sentencing of any of the positions found in
Paragraph 3 which will be advocated by the
U.S. Attorney . . . and (3) The imposition by
the District Court of a sentence which does
not exceed that being recommended by the U.S.
Attorney, as set out in Paragraph 4 and, even
if the Court rejects one or more positions
advocated by the U.S. Attorney or Defendant
with regard to the application of the U.S.
Sentencing Guidelines.
The waiver denominated (2) is irrelevant. Paragraph 3 of
the agreement lists the positions of the parties with respect to
some of the guideline application issues, but as to how offsets to
loss (from the mortgaged collateral) are to be measured, it only
states that "the defendant may present evidence of credits against
this loss figure at sentencing pursuant to the § 2B1.1 Application
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Notes." Paragraph 3 says nothing about the government's position
on the calculation of credits.
As to the subparagraph (3) waiver, its terms preclude the
defendant from appealing from any sentence at or below "the
recommendation of the U.S. Attorney, as set out in Paragraph 4."
But that paragraph sets forth no proposed sentence or sentencing
range: it merely provides that the government will request
"[i]ncarceration within the guideline range." The effect of the
agreement in this respect is therefore to preclude McCoy from
challenging any sentence that falls "within the guideline range."
McCoy's arguments on appeal are that, by both a legal
error and a mathematical mistake, the district court mis-measured
the loss and so misapplied the guidelines; if he is correct, then
his sentence was not "within the guideline range" and his appeal is
not barred by the waiver. We agree with the Fourth Circuit that a
waiver forgoing "any appeal . . . if the sentence imposed herein is
within the guidelines" does not waive the right to appeal an
alleged misapplication of the guidelines. United States v. Bowden,
975 F.2d 1080, 1081 n.1 (4th Cir. 1992), cert. denied, 507 U.S. 945
(1993).3
3
Accord United States v. Williams, 1997 U.S. App. LEXIS 7639,
at *6-*11 (9th Cir. Apr. 15, 1997). But see United States v.
Holland, 214 Fed. Appx. 957, 958 n.3 (11th Cir.) (per curiam),
cert. denied, 76 U.S.L.W. 3163 (2007); United States v.
Bickerstaff, 2000 U.S. App. LEXIS 25641, at *8-*10 (6th Cir. 2000)
(dicta).
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The final clause of McCoy's waiver says that the waiver
applies "even if the Court rejects one or more positions advocated
by the U.S. Attorney or Defendant with regard to the application of
the U.S. Sentencing Guidelines." Perhaps this provision was in
fact meant to foreclose review of all of the district judge's
decisions as to how to apply the guidelines, whether mistaken or
not. But it does not say so clearly; it is not the natural reading
of the language; and it is hardly a reading that one would rush to
embrace. And, with ambiguity in plea agreements construed against
the government, United States v. Oladimeji, 463 F.3d 152, 157 (2d
Cir. 2006); United States v. Somner, 127 F.3d 405, 408 (5th Cir.
1997) (per curiam), it is a reading we cannot accept.4
McCoy's primary argument on appeal--that he should
receive credit against the loss suffered by the banks for those
amounts that were later recouped by the banks through foreclosure
or other means--is one that the district judge firmly rejected at
sentencing. We review the district court's interpretation of the
sentencing guidelines de novo; the factual findings on which it
4
Broader appeal waivers, which could preclude the type of
challenge McCoy attempts here, are not difficult to draft. E.g.,
United States v. Moyer, 2007 U.S. App. LEXIS 22225, at *2 (10th
Cir. Sep. 17, 2007) (waiver reserved right to appeal "a sentence
above the high end of the guideline range as determined by the
district court at sentencing" (second emphasis added)); United
States v. Anglin, 215 F.3d 1064, 1066 (9th Cir. 2000) (defendant
waived right to appeal "on any ground whatever" unless "the Court
in imposing a sentence departs . . . upward from the guideline
range determined by the Court to be applicable to the Defendant"
(emphasis added)).
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based its determinations are reviewed only for clear error. United
States v. Walker, 234 F.3d 780, 783 (1st Cir. 2000).
Under the guidelines, "loss is the greater of actual loss
or intended loss." U.S.S.G. § 2B1.1, cmt. n.2(A). To the extent
that actual loss is being calculated, that figure likely should
exclude any amounts subsequently recovered by the victims. The
guideline application notes instruct that in cases involving
pledged collateral, "the amount the victim has recovered at the
time of sentencing from disposition of the collateral, or . . . the
fair market value of the collateral at the time of sentencing"
should be credited against the loss. Id. n.2(E)(ii); see also
United States v. Kelley, 76 F.3d 436, 439 (1st Cir. 1996).
The application note accurately describes the calculation
of actual loss, but it cannot be mechanically followed where
intended loss is higher, and the courts have so recognized.5 The
guideline makes clear that intended loss--"expected" would be a
better term--is to be used where it is higher than actual loss,
that expectation being a measure for the defendant's culpability.
United States v. Rostoff, 53 F.3d 398, 409 (1st Cir. 1995). And
5
United States v. McCormac, 309 F.3d 623, 628-29 (9th Cir.
2002); United States v. Williams, 292 F.3d 681, 686 (10th Cir.
2002). Actual loss of course governs when it is the higher
measure, as in many of McCoy's cited cases. And actual loss
appeared to have been ordinarily controlling in fraudulent loan
cases under a prior version of the guidelines, making much of
McCoy's cited authority outdated, e.g., United States v. Lavoie, 19
F.3d 1102, 1105 (6th Cir. 1994). See U.S.S.G. § 2F1.1, cmt. n.7(b)
(1991).
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the district judge clearly indicated here that he was measuring
intended loss.
Depending on the facts, intended loss could range from
zero--e.g., if the defendant sincerely intended and reasonably
expected fully to repay the loan, United States v. Schneider, 930
F.2d 555, 559 (7th Cir. 1991)--to the entire value of the loan--
e.g., if the defendant attempted to conceal the collateral,
McCormac, 309 F.3d at 628. As McCoy was obtaining loans for
individuals with low income and poor credit, he could--and should--
have expected that the banks would probably recover only the value
of the mortgaged properties. Intended loss was therefore the value
of the loans less the expected value of the properties.6
The district judge determined that the expected value
of the properties at the time of the frauds was the price paid for
the properties. The land-flipping in this case tended to occur
rapidly, with homes being sold to new purchasers just weeks or even
days after being purchased for use in the frauds. Thus, the
purchase price paid by those engaged in the scheme was a reasonable
proxy of the value of the collateral at the time that the frauds
occurred; and a "reasonable estimate" is all that is necessary.
U.S.S.G. § 2B1.1, cmt. n.2(C).
6
See United States v. Alli, 444 F.3d 34, 38 (1st Cir. 2006)
("[A] person is presumed to have generally intended the natural and
probable consequences of his or her actions."); cf. United States
v. Morrow, 177 F.3d 272, 301 (5th Cir.) (per curiam), cert. denied
sub nom. Cox v. United States, 528 U.S. 932 (1999).
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Most of the properties appreciated after the frauds and
before their post-foreclosure resale, but this does not alter the
defrauders' reasonable expectations at the time that the frauds
occurred. They had no knowledge of how long it would take before
the innocent buyers defaulted and their properties were foreclosed
on by lenders and resold. That this took long enough that some
properties went up in market price (and others down) has nothing to
do with culpability.
This brings us to the mathematical error made by the
district judge in computing the loss figure under his own formula.
In subtracting from the mortgage loans the prices paid by
defendants for the mortgaged properties and then summing the
differences, the district judge made a mathematical error. If the
calculation had been performed correctly, the total loss figure
would be under $400,000--as the government now concedes. That
would reduce McCoy's total offense level and translate to a
sentencing range of 33 to 41 months (assuming the downward
adjustment in criminal history made by the judge).
But because McCoy did not object below (or, for that
matter, in this court until we raised the matter sua sponte) any
relief depends on a decision that the mistake constitutes plain
error. United States v. Olano, 507 U.S. 725, 732 (1993). The
first three components of the plain error test are rather easily
satisfied on these facts: there was an error, it is plain enough
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even though it passed at the time without notice, and--as
correction produces a range below the sentence imposed--it probably
altered the resulting sentence.7
What remains is the question whether leaving the error
uncorrected would cause a miscarriage of justice, United States v.
Young, 470 U.S. 1, 15 (1985), i.e. whether the error "seriously
impaired the fairness, integrity, or public reputation of judicial
proceedings." United States v. Duarte, 246 F.3d 56, 60 (1st Cir.
2001). Olano, which is well established law, makes clear that the
miscarriage requirement is in addition to a finding that there was
error, that it is clear and that it likely altered the result.
In principle, one can imagine a mathematical error that
had no likely effect on the sentence, United States v. Keigue, 318
F.3d 437, 446 (2d Cir. 2003), or was trivial, or was affirmatively
induced by the defendant, or merely underlay a specific stipulated
sentence. Even in this case, it is far from clear that the
sentence was itself unjust: the plea bargain narrowed the number of
counts, McCoy got a break on criminal history, and nothing in the
loss calculus reflects the harm that may have been done to the
borrowers themselves--only to the banks.
7
Especially in the post-Booker era where the guidelines are
merely advisory, it might turn out that the sentencing judge
thought the sentence correct even with the guideline range
clarified; but on the present facts there is no reason to think
this is likely.
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But there is something peculiarly uncomfortable about a
conceded mathematical error which--as in this case--resulted in a
sentence above the proper guideline maximum. And the additional
time in jail was probably not trivial: from mid-range to mid-range
is almost an extra year in jail. Under these circumstances, we
exercise our discretion to remand for re-sentencing consistent with
this decision.
It is so ordered.
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