Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-01-03070/USCOURTS-caDC-01-03070-0/pdf.json

Parties Involved:
Darrel A. Goodwin
Appellant
United States of America
Appellee

Document Text:

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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, argued 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.

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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. Although 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 purchase 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 Sentencing 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). Specifically, 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 confidential 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.

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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 Goodwin 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 contribute $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 Special 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 payment; 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, Goodwin 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 payment 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.

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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 disposed 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 departure. 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 Goodwin 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.

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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 profitably 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 questions are reviewed de novo; factual findings are to be affirmed 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 ambiguity 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 confinement 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 outUSCA Case #01-3070 Document #729456 Filed: 01/31/2003 Page 5 of 10
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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 government agent sells or negotiates to sell a controlled substance to a defendant), the court finds that the government agent set a price for the controlled substance that

was substantially below the market value of the controlled substance, thereby leading to the defendant's

purchase of a significantly greater quantity of the controlled substance than his available resources would have

allowed him to purchase except for the artificially low

price set by the government agent, a downward departure 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 conventional 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.

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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 complete 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 questioned Abrams about the price of individual kilograms, he did

not elicit any testimony from him (or offer any other evidence) to suggest that $20,000 per kilo was not within the

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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 threekilogram 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 circumstances, contacts, drug distribution network, or his experience 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

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cash, not heroin, in payment. The agents were also

likely aware of Goodwin's heroin addiction, and no experienced seller of drugs would have engaged in this transaction 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 fronting 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 depiction of the agents' virtually throwing drugs at an unknown

purchaser. First, while the agents had had no cocaine dealings 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 selfdepiction 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 purchasing. 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.

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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.

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