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
-2-

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. 
The district judge used the 2001 version of the sentencing 1

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.

-3-

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. A driving element under the guidelines is the 1

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.
The parties do not agree on a precise figure, primarily due 2

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).

-4-

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 $ 400,000 and a sentencing 2

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.
-5-

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
Accord United States v. Williams, 1997 U.S. App. LEXIS 7639, 3

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). 

-6-

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
Broader appeal waivers, which could preclude the type of 4

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)).

-7-

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
United States v. McCormac, 309 F.3d 623, 628-29 (9th Cir. 5

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).

-8-

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. The 5

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
See United States v. Alli, 444 F.3d 34, 38 (1st Cir. 2006) 6

("[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). 

-9-

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).
-10-

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
Especially in the post-Booker era where the guidelines are 7

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.

-11-

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.
-12-

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.