United States v. Steele

897 F.3d 606

UNITED STATES of America, Plaintiff-Appellee,

v.Dominic Demarcus STEELE, Defendant-Appellant.

No. 17-4580

United States Court of Appeals, Fourth Circuit.

Argued: March 20, 2018

Decided: July 27, 2018

ARGUED: Joshua B. Carpenter, FEDERAL DEFENDERS OF WESTERN NORTH CAROLINA, INC., Asheville, North Carolina, for Appellant. Amy Elizabeth Ray, OFFICE OF THE UNITED STATES ATTORNEY, Asheville, North Carolina, for Appellee. ON BRIEF: Anthony Martinez, Federal Public Defender, FEDERAL DEFENDERS OF WESTERN NORTH CAROLINA, INC., Charlotte, North Carolina, for Appellant. R. Andrew Murray, United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Charlotte, North Carolina, for Appellee.

Before GREGORY, Chief Judge, WILKINSON, and AGEE, Circuit Judges.

Vacated and remanded by published opinion. Chief Judge Gregory wrote the opinion, in which Judge Wilkinson and Judge Agee joined.

GREGORY, Chief Judge:

Dominic Steele was convicted of postal theft in violation of 18 U.S.C. § 1709. Relying on the victim’s unsupported estimate of its replacement costs, the district court ordered Steele to pay $52,990 in restitution. Because fair market value is the appropriate measure of value for restitution and the Government failed to sufficiently demonstrate the victim’s loss, we vacate the restitution order and remand.

I.

In January 2015, the U.S. Postal Service hired Steele as a mail handler assistant at its Processing and Distribution Center in Charlotte, North Carolina. As a part of his duties, Steele processed bulk mail en route to its ultimate destination. Around June 2015, Steele began stealing video game discs sent by GameFly, a video game rental service that ships its merchandise to customers through the mail.¹

In September 2015, a GameFly Loss Prevention Manager contacted the U.S. Postal Service Office of Inspector General to report a significant loss of GameFly video games intended for the Charlotte Processing and Distribution Center. On December 20, 2015, federal agents interviewed Steele after they observed him leaving the Processing and Distribution Center and placing numerous GameFly discs in his personal vehicle. During the interview Steele admitted to the thefts, and the next day he submitted his resignation.

In August 2016, a federal grand jury returned an indictment for Steele, charging him with one count of postal theft in violation of 18 U.S.C. § 1709. Steele pleaded guilty without a written plea agreement.

The U.S. Probation Office prepared a Presentence Investigation Report (PSR) based in part on a Victim Impact Statement from GameFly. In the statement, GameFly reported that it lost 1,390 video game discs during the relevant timeframe and that 100 were recovered from Steele’s home and vehicle. GameFly estimated that the lost video game discs cost $40 each and thus calculated the value of the 1,290 unaccounted-for games at $51,600. GameFly further noted that for each of the 1,390 games that went missing, it incurred an additional $1 cost to mail its customers replacement games. The PSR therefore recommended that Steele pay $52,990 in restitution—$51,600 for the lost games themselves plus $1,390 in mailing costs.

Prior to sentencing, Steele objected to the PSR’s loss calculation and restitution amount, but the district court overruled his objections. J.A. 183, 202. At sentencing, Steele argued that there was insufficient evidence to support the $40-per-game estimate. The Government responded that GameFly’s estimate was based on the average cost of replacing a game. The Government then called as a witness Chad Caviness, an agent with the U.S. Postal Service Office of the Inspector General. Caviness testified that (1) agents recovered 341 discs from Steele’s vehicle and residence, J.A. 46; (2) Steele sold newer games for $30 and older games for $20–25, J.A. 42; (3) he had no documentation from GameFly that detailed the value of each game it lost, J.A. 52; and (4) when GameFly reported an estimated average replacement cost for the games, the agents "just took [GameFly’s] word for it." J.A. 49.

After Caviness’s testimony, Steele renewed his objection to the recommended restitution amount. Steel argued that GameFly’s loss calculation should instead be based on the fair market value of the game discs because the vast majority of the games he stole were used and valued at substantially less than $40. Steele presented his own research—trade-in receipts and reports from a video game price charting website—to support his argument. However, the district court disagreed and instead reasoned that the fair market value of the games was "not relevant" to GameFly’s actual victimization. J.A. 76. The district court then accepted GameFly’s unsupported estimate of its replacement costs, ordered restitution in the amount of $52,990, and imposed a three-month term of imprisonment. J.A. 76, 89, 173. Steele timely appealed, challenging the restitution order.²

II.

We review the district court’s restitution order for abuse of discretion. United States v. Ocasio , 750 F.3d 399, 412 (4th Cir. 2014). "A district court abuses its discretion when it (1) acts arbitrarily, as if neither by rule nor discretion, (2) fails to adequately take into account judicially recognized factors constraining its exercise of discretion, or (3) rests its decision on erroneous factual or legal premises." United States v. Alvarado , 840 F.3d 184, 189 (4th Cir. 2016) (internal quotations marks and citation omitted).

III.

"[F]ederal courts do not have the inherent authority to order restitution[.]" United States v. Cohen , 459 F.3d 490, 498 (4th Cir. 2006). "The power to order restitution must therefore stem from some statutory source[.]" United States v. Broughton-Jones , 71 F.3d 1143, 1149 (4th Cir. 1995) (quoting United States v. DeSalvo , 41 F.3d 505 (9th Cir. 1994) ). Here, the authorizing statute is the Mandatory Victim’s Restitution Act (MVRA), 18 U.S.C. § 3663A.

The MVRA provides that the district court "shall order ... that the defendant make restitution to the victim of the offense" upon conviction for "an offense against property ... including any offense committed by fraud or deceit." 18 U.S.C. §§ 3663A(a)(1), (c)(1)(A)(ii). The district court must order a convicted defendant to either "return the property to the owner" or,

if return of the property ... is impossible, impracticable, or inadequate, pay an amount equal to—

(i) the greater of—

(I) the value of the property on the date of the damage, loss, or destruction; or

(II) the value of the property on the date of sentencing, less(ii) the value (as of the date the property is returned) of any part of the property that is returned.

Id . § 3663A(b)(1) (emphasis added).

Steele argues that the district court miscalculated "the value of the property" by using GameFly’s unsubstantiated estimate of its replacement costs rather than the fair market value of the stolen video games. See id. We agree. For the reasons set forth below we find that the district court erred by (A) rejecting the fair market value of the lost games and (B) improperly placing the burden of proof on Steele, the defendant.

A.

The MVRA gives district courts discretion to determine the proper method of calculating the value of lost property. The text of the MVRA clearly instructs courts what to value (the property that cannot be reasonably returned) and when to value it (the date of loss or the date of sentencing). 18 U.S.C. § 3663A(b)(1) ; United States v. Boccagna , 450 F.3d 107, 114 (2d Cir. 2006). However, Congress declined to instruct district courts how to value property. Id . Had Congress intended district courts to use a particular valuation method in all circumstances, presumably it would have articulated one. Cf. Keene Corp. v. United States , 508 U.S. 200, 208, 113 S.Ct. 2035, 124 L.Ed.2d 118 (1993) ("[I]t is generally presumed that Congress acts intentionally and purposely" when it "includes particular language in one section of a statute but omits it in another[.]" (quoting Russello v. United States , 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983) ) ). Instead of prescribing a single valuation method, the MVRA leaves that determination to district courts. The MVRA requires courts to issue restitution pursuant to 18 U.S.C. § 3664, which instructs the court to "order restitution to each victim in the full amount of each victim’s losses as determined by the court [.]" 18 U.S.C. § 3664 (f)(1)(A) (emphasis added); 18 U.S.C. § 3663A(d). Accordingly, we agree with many of our sister circuits that district courts have discretion to determine how to value lost property under the MVRA. See, e.g. , Boccagna , 450 F.3d at 115 ("[W]e construe ‘value’ as used in the MVRA to be a flexible concept to be calculated by a district court by the measure that best serves Congress’s statutory purpose[.]"); United States v. Frazier , 651 F.3d 899, 904 (8th Cir. 2011) ("[T]he ‘value’ of lost property under the MVRA must be determined in the district court’s discretion depending on the circumstances of each case."); United States v. Kaplan , 839 F.3d 795, 802 (9th Cir. 2016) ("It is within the district court’s discretion to determine the proper method of calculating the value of such property when ordering restitution pursuant to 18 U.S.C. § 3663A."); United States v. Ferdman , 779 F.3d 1129, 1132 (10th Cir. 2015) ("Although the MVRA does not define ‘value,’ ... [it] appears to contemplate the exercise of discretion by sentencing courts in determining the measure of value appropriate to restitution calculation in a given case." (internal quotation marks and citation omitted) ).

District courts use a variety of methods to calculate the value of lost property. See, e.g. , United States v. Howard , 887 F.3d 1072, 1078 (10th Cir. 2018) ("[A] district court may, for different types of property, determine that fair market value, replacement cost, foreclosure price, cost to the victim, repair or restoration costs, or another measure of value is most...