United States v. Margiotta

475 F.Supp.3d 1152

UNITED STATES of America, Plaintiff,

v.Peter MARGIOTTA, Defendant.

CR 17-143-BLG-SPW

United States District Court, D. Montana, Billings Division.

Signed July 30, 2020

Bryan T. Dake, U.S. Attorney's Office, Billings, MT, Eric E. Nelson, U.S. Environmental Protection Agency - OCEFT, Denver, CO, for Plaintiff.

ORDER AND FINDINGS ON RESTITUTION

SUSAN P. WATTERS, U.S. DISTRICT JUDGE

A jury convicted the Defendant, Peter Margiotta, for violations of the general duty and knowing endangerment clauses of the Clean Air Act, along with conspiracy to violate both, after an explosion at a facility Margiotta owned and operated injured two of his employees, Joshua Garrison and Aaron Osborne. (Doc. 121.) The Court conducted a sentencing hearing on July 10, 2020, where it informed the parties it would take the issue of restitution under advisement. For the following reasons, the Court orders restitution for the negotiated settlement amounts for the victims’ lost income attributable to Custom Carbon Processing, Inc. ("CCP"). The Court does not order restitution for the attorneys’ fees and costs Garrison and Osborne incurred in a related civil lawsuit.

I. Background

Garrison and Osborne retained counsel to pursue civil litigation to recover damages for their injuries from the explosion. (Doc. 200 at 20.) The two filed a civil lawsuit against five defendants, including Margiotta's company, CCP.¹ (Id. ) Garrison and Osborne did not name Margiotta himself as a defendant. During litigation, experts whom Garrison and Osborne retained estimated the victims’ past and future lost income as a result of their bodily injuries to be $1,766,455 and $1,216,493, respectively. (Id. )

All the parties ultimately settled the civil litigation. (Id. at 21.) Garrison received $667,500 in gross settlement payments, while Osborne received $597,500. (Id. ) Of those amounts, CCP paid $250,000 to Garrison and $200,000 to Osborne. (Doc. 203-1 at 1.) However, Garrison incurred a total of $268,750 in attorneys’ fees and costs, while Osborne incurred a total of $255,225.40. (Id. )

The Government has provided the Court with a restitution spreadsheet and exhibits breaking down the settlement disbursement. (Id. ) Garrison and Osborne accepted and approved the settlement disbursement statements their counsel provided them, and the supporting documents—which include expert opinions and the general release and settlement agreements—were all filed in the related civil case. (Id. ) The Court therefore finds the values they contain sufficiently reliable and will use those values in determining restitution. What remains is determining which restitution amounts Margiotta must pay under the law.

The Government provided three separate options it feels are reasonable for determining the appropriate restitution amounts: Option 1, estimated lost income minus settlement payments; Option 2, settlement payments minus net settlement proceeds actually received to account for attorneys’ fees expended to seek compensation for bodily injury losses; and Option 3, estimated lost income minus settlement proceeds actually received. (Doc. 200 at 21–24.) During the sentencing hearing, Margiotta objected to restitution because of a lack of direct and proximate causation, along with the inclusion of attorney's fees as a component of restitution. Margiotta provided no further argument or evidence regarding restitution.

The Government believes a conservative measure addressing only the victims’ lost income to be a fair starting point for restitution. Garrison and Osborne have neither supplied documentation nor asked for restitution to compensate them for other expenses, such as medical or rehabilitation services. (Doc. 200 at ¶ 27; doc. 187-1); see 18 U.S.C. § 3663(b)(2). Therefore, the Court will consider only their lost income.

The Government concedes in Option 2 that the lost income values from the experts Garrison and Osborne retained ($1,766,455 and $1,216,493, respectively) were provided in the course of civil litigation and resulted in the lower negotiated gross settlement proceeds ($667,500 and $597,500, respectively). This suggests the negotiated settlement proceeds were reasonable values for the victims’ lost income. The Court finds these values are the most reasonable starting points for restitution.

The Government argues Margiotta should be accountable for the full negotiated settlement amount. The Government's Option 2 also calls for the Court to order restitution for the amounts Garrison and Osborne expended on attorneys’ fees and costs. The remainder of this Order addresses these arguments.

I. Discussion

A. Margiotta is only accountable for the amounts CCP paid the victims for their lost income.

The Court must first determine whether Margiotta should pay the full negotiated settlement amount in restitution. 18 U.S.C. § 3664 provides the procedure for issuance and enforcement of a restitution order. Initially, the Court must calculate the "full amount of each victim's losses" that Margiotta caused through his illegal conduct, regardless of his financial resources or economic circumstances, § 3664(f)(1), or the fact that the victims received compensation from insurance "or any other source," § 3664(f)(2). See United States v. Ritchie , 858 F.3d 201, 215–16 (4th Cir. 2017). After calculating the victims’ losses, the Court must determine whether the statute affords Margiotta any credits against the obligation, so as to prevent double recovery by the victims. Section 3664(j) ; United States v. Stanley , 309 F.3d 611, 613 (9th Cir. 2002).

1. The harm Margiotta proximately caused through his criminal conduct is most closely related to the amount CCP paid in the negotiated settlement.

"Restitution seeks to compensate the victim for all the direct and proximate losses resulting from the defendant's conduct ...." United States v. Gossi , 608 F.3d 574, 581 (9th Cir. 2010) (emphasis omitted). Restitution is limited to those losses directly resulting from the defendant's criminal conduct. United States v. Gamma Tech Indus. , 265 F.3d 917, 927 (9th Cir. 2001) ; see also United States v. Koenig , 952 F.2d 267, 275 (9th Cir. 1991) (holding restitution is permitted "only for losses directly resulting from the defendant's offense" (internal quotations and citations omitted)).

Several entities negotiated and settled with Garrison and Osborne for their lost income, which implies these entities found there was enough evidence that a jury may have held them at least partially responsible. See (Doc. 203-1.) Margiotta was convicted for knowing endangerment and general duty clause violations under the Clean Air Act. However, his criminal conduct does not encompass the conduct of every party whose decisions, in one way or another, contributed to the chain of events that brought about the explosion.² The other entities produced and transported the natural gas condensate and constructed CCP's facility—all actions that may have contributed to the explosion. Therefore, it would be unreasonable to hold Margiotta accountable for the full negotiated settlement amounts in restitution.

Ordinarily, determining the portion for which Margiotta is responsible would require a lengthy restitution hearing. Thankfully, that is unnecessary. All the entities, including CCP, have essentially apportioned responsibility among themselves through the amounts they each agreed to pay the victims for their lost income—all with the victims’ approval. (Id. ) The best approximation for each entity's proportional contribution to the victims’ injuries is therefore the settlement amounts.

In that case, it is most reasonable to tie the harm directly and proximately attributable to Margiotta to the amounts for which CCP settled. Margiotta and CCP are, of course, distinct (which will bear on to whom Margiotta must pay restitution). Nevertheless, ample evidence at trial established Margiotta as the CEO, owner, and operator of CCP. (Doc. 157, Tr. at 520–22.) He had the final word on all CCP's decisions, and he engaged in the criminal conduct at issue as CCP's CEO. See (id. ). Therefore, the amounts for which CCP and the victims agreed to settle are amounts directly and proximately caused by Margiotta's criminal conduct—$250,000 for Garrison and $200,000 for Osborne.

2. Margiotta must establish the source by which CCP compensated the victims, and he will be ordered to pay restitution to that source.

"If a victim has received compensation from insurance or any other source with respect to a loss, the court shall order that restitution be paid to the person who provided or is obligated to provide the compensation ...." Section 3664(j)(1).³ In other words, "where a third party has assumed the victim's losses by reimbursing the victim, the court must order a defendant to pay restitution directly to that third party." United States v. Thompson , 792 F.3d 273, 278 (2d Cir. 2015) ; see also United States v. Rizk , 660 F.3d 1125, 1137 (9th Cir. 2011) (requiring a defendant to pay back his insurer after it compensated his victims for a portion of their losses).

CCP paid Garrison $250,000 and Osborne $200,000. (Doc. 203-1 at 1.) The Court will not order Margiotta to pay the victims those amounts because it would amount to a double recovery. See Stanley , 309 F.3d at 613.

Nevertheless, while Margiotta is responsible for those amounts, the Court lacks information about how they were actually paid. If insurance or another source compensated Garrison and Osborne on CCP's behalf, Margiotta may have to pay restitution to insurance or that other source. If Margiotta paid these amounts himself, he would owe no additional restitution for the amounts CCP paid. Either way, he is in the best position to resolve the matter, see § 3664(e), and he must supply documentation and records regarding the payments so the Court may determine to whom he owes restitution (if anyone).

B. Garrison and Osborne are not entitled to restitution for their civil attorneys’ fees...