United States v. Murphy

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. CHRISTOPHER MURPHY, Defendant-Appellant.

No. 19-3290

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

June 3, 2020

NOT RECOMMENDED FOR PUBLICATION

File Name: 20a0322n.06

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO

OPINION

BEFORE: ROGERS, STRANCH, and THAPAR, Circuit Judges.

STRANCH, J., delivered the opinion of the court which ROGERS and THAPAR, JJ., joined. THAPAR, J. (pg.12), delivered a separate concurrence. STRANCH, J. (pg. 13), delivered a separate concurrence.

JANE B. STRANCH, Circuit Judge. Christopher Murphy pled guilty to one count of attempt to access without authorization a protected computer for private commercial gain, in violation of 18 U.S.C. § 1030(b). He attempted to pay an employee of the National BiWeekly Administration ("NBA") to help him illegally access NBA's client database. During sentencing, the district court denied Murphy's objection to a 14-level increase to his offense level under the Sentencing Guidelines based on the "intended loss" that he sought to inflict. The district court calculated "intended loss" under the Guidelines commentary definition rather than the statutory definition of "loss" in 18 U.S.C. § 1030(b), and it considered Murphy's intent and culpability in sentencing. Murphy appeals the district court's application, interpretation, and factual findings in support of the intended loss calculation. We AFFIRM.

I. BACKGROUND

A. Factual Background

Christopher Murphy owned and operated Biweekly Mortgage Association, a business he founded that helped customers make mortgage payments on a bi-weekly, rather than monthly, basis. Murphy was the sole proprietor of the company and claimed that his personal and business expenses were filtered through the company, but he did not have copies of his tax returns or any verification of the company.

The National BiWeekly Administration, Inc. ("NBA") is a similar business based in Xenia, Ohio. NBA assists subscribing homeowners to make timely bi-weekly payments on their mortgages for seven dollars each per month, among other services. NBA has information on over 400,000 people in its database, but only about 135,000 were subscribers to the bi-weekly mortgage payment service. Before 2015, NBA had around 170 employees to service the 135,000 active subscribers, and it collected seven dollars per month from these subscribers. In May 2015, the Consumer Finance Protection Bureau brought a civil suit against NBA for alleged misrepresentations the company made to the 135,000 subscribers. A federal court subsequently enjoined NBA from collecting the monthly fee, and while the appeal to the order was pending, NBA suspended the bi-weekly service completely on November 23, 2015. NBA still considered the 135,000 subscribers its clients because they enrolled in lifetime membership programs and were still in the company's system, but as a result of the injunction and suspension of the program, the number of NBA employees dropped to seven.

When Murphy learned that NBA had suspended its bi-weekly mortgage service, he tried to contact the president of NBA in an alleged attempt to reach an agreement for his company to service NBA's clients. When those efforts failed, Murphy took matters into his own hands to obtain NBA's client information so he could solicit the subscribers.

In September 2017, Murphy approached an NBA employee and offered the employee $14,000 to enter NBA's office, receive an email with malware,¹ and open the email and the attachment so Murphy could gain access to NBA's computer system. Murphy said he would provide a thumb drive for the employee to download the client list from the company's computer system as a backup. On October 2, 2017, Murphy gave the employee, who had become a confidential informant, money and the thumb drive, and he later sent the email with malware. Murphy was arrested that same day.

B. Procedural History

Murphy pled guilty to one count of attempt to access without authorization a protected computer for private commercial gain in violation of 18 U.S.C. § 1030(b). As part of his Sentencing Guidelines calculation, USSG § 2B1.1(b)(1)(H) dictates a 14-level increase in the offense level if the "loss" from an applicable offense is between $550,000 and $1,500,000. The Presentence Report (PSR) recommended such an increase based on the Government's calculation of the potential loss to NBA, which it pegged at $945,000—135,000 subscribers paying fees for one month at seven dollars each. Based on this calculation and his criminal history and acceptance of responsibility, Murphy's Guidelines range was calculated at 27-33 months.

The Government argues that this 14-level increase is appropriate based on the pecuniary harm that Murphy reasonably intended, citing Application Note 3 of the Guidelines commentary, which defines loss for the purposes of the Guidelines calculation. Relevant to the present case is the commentary definition of intended loss:

"Intended loss" (I) means the pecuniary harm that the defendant purposely sought to inflict; and (II) includes intended pecuniary harm that would have been impossible or unlikely to occur (e.g., as in a government sting operation, or an insurance fraud in which the claim exceeded the insured value).

USSG § 2B1.1 cmt. 3(A)(ii). Even though NBA was not offering its bi-weekly service to the 135,000 subscribers at the time of Murphy's offense, the Government argues that the list had value both to NBA and to Murphy, who offered $14,000 to illegally obtain information on the subscribers to solicit them to purchase the same services from his company.

Murphy objects to the Guidelines range and argues that NBA could not have sustained a loss because NBA was not servicing the clients at the time of the offense. Murphy contends that there was no actual loss, and that any intended loss was highly unlikely to result from a scheme so obviously doomed to failure. Murphy also argues that he did not intend to steal the lists, but believed that NBA was going out of business and wanted to help the clients by providing the same service.

The district court found that while he did not intend to run NBA out of business, Murphy thought NBA was on its last legs and he could build his own business by obtaining its client list illegally. The court found the Government's intended loss calculation to be a reasonable and conservative estimate, because it was not based on all 400,000 customers of NBA but on only the 135,000 who subscribed to the bi-weekly service, and intended loss was computed only for a one-month period.

After engaging in an extensive analysis of the intended loss calculation, the district court denied Murphy's objection to the Guidelines range. It noted that while impossible or unlikely losses are not grounds to reduce the intended loss figure, "one has to consider the economic improbability or impossibility that intended loss, even conservatively stated, even reasonable on its face, could have been achieved." The court found it highly doubtful that Murphy would have been able to sign up many of the 135,000 subscribers for his own business. The economic realities did not render the Guidelines range invalid, but the court varied downward from the Guidelines range of 27-33 months under 18 U.S.C. § 3553(a), because "the intended loss would have been impossible to achieve given the circumstances."² Murphy was sentenced to 12 months and one day of imprisonment.

II. ANALYSIS

Murphy appeals the district court's denial of his objection to the calculation of the Guidelines range based on the interpretation and calculation of "intended loss." Murphy also argues for the first time on appeal that the definition of "intended loss" in the Guidelines commentary conflicts with the definition of "loss" in the criminal statute under which he was convicted and that following the commentary rather than the statute is a separation of powers violation.

A. Interpretation and Calculation of Intended Loss

We "review de novo the district court's method for calculating [loss], and review its factual findings for clear error." United States v. Maddux, 917 F.3d 437, 450 (6th Cir. 2019) (citing United States v. Warshak, 631 F.3d 266, 328 (6th Cir. 2010)).

USSG § 2B1.1 cmt. 3(A)(ii) is clear that intended loss includes "intended pecuniary harm that would have been impossible or unlikely to occur." But the impossible or unlikely loss must still be intended, and therefore the district court considered whether loss that is highly unlikely or improbable can still reasonably be intended. See United States v. McBride, 362 F.3d 360, 375 (6th Cir. 2004) ("A court should . . . consider 'whether there was any reasonable possibility that the scheme could have caused the loss the defendant intended' . . . because the Sentencing Commission is using intended loss as a proxy for the defendant's degree of culpability." (quoting United States v. Roen, 279 F. Supp. 2d 986, 991 (E.D. Wis. 2003))).

Our court has considered how the intended loss calculation applies in situations where the loss is so high that it is not rooted in reality. We previously vacated sentences where "the total intended loss bore no relation to 'economic reality,' . . . because . . . the plan had no chance of success." United States v. Fleming, 128 F.3d 285, 288 (6th Cir.1997). In McBride, we noted that Amendment 617 from 2001, which added the commentary language in question here, effectively prevented courts from applying the economic reality principle when calculating intended loss. 362 F.3d at 374; see also United States v. Anderson, 353 F.3d 490, 505 n.13 (6th Cir. 2003). McBride makes clear, however, that "there is surely some point at which a perpetrator's misperception of the facts may become so irrational that the words 'intended loss' can no longer reasonably apply." 362 F.3d at 374. We concluded that the economic realities test is not categorically prohibited under the...