Opinion ID: 197346
Heading Depth: 1
Heading Rank: 4

Heading: the causation quandary

Text: 27 All three appellants challenge the district court's restitutionary orders. Those challenges are similar insofar as they implicate the standard of causation. Therefore, we treat them in the ensemble to that extent. 28
29 Restitution orders customarily are reviewed under an abuse of discretion rubric. See United States v. Hensley, 91 F.3d 274, 277 (1st Cir.1996). In the course of this review, the sentencing court's subsidiary factual findings must be credited unless they are clearly erroneous. See id. To the extent that a challenge to a restitution order hinges on a legal question, however, the sentencing court's answer to that question is reviewed de novo. See United States v. Gilberg, 75 F.3d 15, 20 (1st Cir.1996); United States v. Savoie, 985 F.2d 612, 619 (1st Cir.1993). The appellants' allegation that the district judge employed an improper legal standard of causation presents such a question. 30
31 The level of causation required under the VWPA is not immediately apparent, and the parties' views on the subject are sharply divergent. The appellants advance a theory of direct causation, exhorting us to rule that restitution can be imposed only if the victim's losses result directly from the offense of conviction and therefore that restitution cannot be imposed when an intervening phenomenon (e.g., a collapsing real estate market) is the more immediate cause of the loss. 4 Transposed into the metier of this case, the appellants' theory seemingly would require the government to eliminate the possibility of concurrent causes and prove that the FDIC's losses occurred as a direct result of the bribes that Annarummo solicited and received. The government cannot do so, the appellants posit, because stimuli unrelated to the bribes, such as intervening market forces, caused the ultimate losses. 32 The government's counter-argument is that but for causation suffices; it urges us to rule that restitution can be imposed as long as the victim's losses would not have eventuated but for the criminal activity. But for the bribes, this thesis runs, there would have been no loans, without which there would have been no losses. In this very general sense, the bribes caused the losses--and that, to the government's way of thinking, is enough. 33 The appellants' rejoinder is twofold. First, they debunk the legal standard articulated by the government. Second, they say that even if this articulation accurately reflects the state of the law, it does not justify the district court's restitutionary orders. On the appellants' shared hypothesis, the loans would have issued whether or not the bribes were forthcoming; thus, the Bank would have incurred the losses even if the appellants had played it straight. 34 The parties' positions stand at opposite ends of a continuum. Our effort to determine where on the continuum the correct legal standard is housed starts with the language of the VWPA itself. Section 3663(a) authorizes restitution to any victim for a covered offense. This provision must be read in tandem with section 3664(a), which directs the sentencing court to consider the amount of the loss sustained by any victim as a result of the offense. For purposes of this case, see supra note 1, restitution is appropriate only for the loss caused by the specific conduct that is the basis of the offense of conviction. Hughey, 495 U.S. at 413, 110 S.Ct. at 1981. 35 Since the text of the VWPA does not speak explicitly to the dimensions of the requisite standard of causation, 5 we must consult other sources in our quest to discover it. Next on the list is legislative history. This material, like the statute itself, does not specifically limn the standard of causation. Nonetheless, it offers some important insights. 36 In enacting the VWPA, Congress strove to encourage greater use of a restitutionary remedy. See S.Rep. No. 532, supra, 1982 U.S.C.C.A.N. at 2536-37. At the same time, it disclaimed any intent to convert the main event--the sentencing hearing--into a time-consuming sideshow--prolonged litigation over restitution-related issues. This disclaimer was made manifest in a variety of ways. For example, rather than requiring great precision in fixing the amount of restitution due, Congress visualized the VWPA as authoriz[ing] the court to reach an expeditious, reasonable determination of appropriate restitution by resolving uncertainties with a view towards achieving fairness to the victim. Id. at 2537. 37 In short, the legislative history clearly signals a congressional preference for rough remedial justice, emphasizing victims' rights. In our view, this preference counsels against importing a stringent standard of causation (such as might be appropriate in a tort context) into the VWPA. 38 Of course, rough remedial justice does not mean leaving matters to the whim of the sentencing judge, and Congress did not conceive of restitution as being an entirely standardless proposition. The government must bear the burden of establishing the loss, 18 U.S.C. § 3664(d), and an award cannot be woven solely from the gossamer strands of speculation and surmise. See United States v. Neal, 36 F.3d 1190, 1200-01 (1st Cir.1994). By like token, just as insisting upon a modicum of reliable evidence reinforces the specific advantages of the restitutionary remedy, so too does insisting upon a certain degree of causal precision. As the Supreme Court has noted, demanding a direct relation between the harm and the punishment gives restitution a more precise deterrent effect than a traditional fine. Kelly v. Robinson, 479 U.S. 36, 49 n. 10, 107 S.Ct. 353, 361 n. 10, 93 L.Ed.2d 216 (1986). 39 Finding the legislative history suggestive rather than compelling, we examine the caselaw. In previous decisions, this court has remarked the broad policy goals of the VWPA and concluded that difficulty in achieving an exact measurement of victim loss should not preclude the imposition of restitution. See Savoie, 985 F.2d at 617. On the subject of causation, however, our decisions have tended to involve either situations in which the closeness of the causal link could not seriously be questioned, see, e.g., United States v. Lilly, 80 F.3d 24, 28 (1st Cir.1996), or those in which we found restitution to have been ordered in contravention of Hughey, see, e.g., United States v. Newman, 49 F.3d 1, 11 (1st Cir.1995). Neither polar extreme brings much light to the vexing issue which these appeals present. 40 Neal is the only notable exception to this taxonomy. That case featured a defendant who had been found guilty both of being an accessory after the fact to a bank robbery and of laundering funds. The district court imposed a restitutionary award that equalled the bank's entire loss from the thievery. We vacated the award, noting that it could not be determined on the sparse record available whether the court calculated, pursuant to Hughey, the portion of [the bank's] losses that were actually caused by the specific criminal conduct forming the basis for Neal's convictions. 36 F.3d at 1200 (italics omitted). We instructed the district court, on remand, to hold a hearing on the causation issue and modify the award to the extent that any portion of the loss was not attributable to Neal's criminal conduct. Id. at 1201. In dictum, we cautiously suggested that some varietal of but for causation might suffice. See id. at 1201 n. 10 (If ... evidence is presented indicating that Neal played a significant role in helping the other defendants escape and that but for his actions, there was a substantial likelihood that the full proceeds would have been recovered, the court could well be within its statutory authority in imposing the full [restitutionary amount].). Thus, circuit precedent furnishes a weak indication that but for causation can suffice under the VWPA. 41 Reading the out-of-circuit cases is like attending a bar association meeting in a small town; one can find congenial cases, like friendly faces in the crowd, to support almost any standard of causation for the VWPA. We have found decisions which appear at least superficially to reject but for causation in favor of a direct result standard. See, e.g., United States v. Silkowski, 32 F.3d 682, 689-90 (2d Cir.1994); Ratliff v. United States, 999 F.2d 1023, 1026-27 (6th Cir.1993). By contrast, we have found decisions which seem to accept unqualified but for causation as sufficient under the VWPA. See, e.g., United States v. Keith, 754 F.2d 1388, 1393 (9th Cir.1985); United States v. Richard, 738 F.2d 1120, 1122-23 (10th Cir.1984). We have found decisions which straddle the question, see Government of the Virgin Islands v. Davis, 43 F.3d 41, 46 (3d Cir.1994) (seemingly endorsing, in a single paragraph, both but for and direct causation), and those which confess confusion on the issue, see United States v. Cloud, 872 F.2d 846, 856 n. 13 (9th Cir.1989) (acknowledging a conflict in this circuit regarding the nexus the government must establish between the defendant's criminal conduct and the victim's losses to support a VWPA restitution order). 42
43 Upon close perscrutation, the extreme positions advocated by the parties do not hold out much promise in our quest for a serviceable standard of causation. 44 On the one hand, the sort of direct causation standard that the appellants propose is simply too rigid. Under their theory of intervening forces, a court could not impose restitution even if the defendant's conduct were a substantial cause of a loss, unless it were the last cause. Such a standard would flout the basic purpose of the VWPA. 6 In our judgment, Congress did not contemplate such adamantine formalism when it moved to expand the availability of restitutionary remedies by enacting the VWPA. See S.Rep. No. 532, supra, 1982 U.S.C.C.A.N. at 2537. 45 On the other hand, concerns of fairness require us to reject the unbridled but for causation standard that the government propounds. Under it, a court could impose restitution based on the most tenuous of connections. 7 While it is true that for want of a nail the kingdom reputedly was lost, cf. Benjamin Franklin, Poor Richard's Almanac (1758), it could hardly have been Congress' intent to place the entire burden on the blacksmith if the nail was an insignificant factor in the calculus of concurrent causes. Such a result would countervail principles of fundamental fairness and, in the bargain, would be at odds with the majority of reported cases. See, e.g., United States v. Holley, 23 F.3d 902, 914-15 (5th Cir.1994); United States v. Tyler, 767 F.2d 1350, 1351-53 (9th Cir.1985). 46 Having rejected the parties' proposals, it falls to us to fashion the appropriate legal standard. Despite the gaps in the statute and in its legislative history, and notwithstanding the contradictions that permeate the cases, we think it is possible to distill certain bedrock principles from the sources that we have consulted. 47 First: Restitution should not be ordered in respect to a loss which would have occurred regardless of the defendant's conduct. A good illustration of this principle in operation is found in United States v. Blackburn, 9 F.3d 353 (5th Cir.1993). There, the sentencing court included foreclosure expenses in calculating the amount of restitution due. The Fifth Circuit reversed, citing proof that the foreclosure would have happened even if the defendant had not committed the crime. See id. at 359; see also United States v. Walker, 896 F.2d 295, 305-06 (8th Cir.1990) (holding that when defendants, who owned a company, defrauded the United States, restitution to laid-off company employees was improper because the record failed to show that the fraud caused the company to cease operations). 48 Second: Even if but for causation is acceptable in theory, limitless but for causation is not. Restitution should not lie if the conduct underlying the offense of conviction is too far removed, either factually or temporally, from the loss. We offer two examples of remoteness in fact. The first arises in a case that bears some similarity to the instant case. 49 In Diamond, 969 F.2d at 963-64, the defendant pled guilty to filing false financial reports with a lender. The loan had already been made before Diamond authored the reports, but the reports apparently helped in obtaining an extension. The loan proved uncollectible. The sentencing court ordered the defendant to make restitution, reasoning that the loss stemmed from the false reports. The court of appeals refused to equate the extension of an existing loan with the granting of the loan in the first place, and negated the restitutionary order because there was no proof that the extension worsened the lender's position. See id. at 966. 50 A somewhat different example of factual remoteness is found in United States v. Sablan, 92 F.3d 865 (9th Cir.1996). There, the defendant had been convicted of computer fraud. The district court ordered restitution for expenses incurred by the victim in meeting with investigators to discuss the case. The Ninth Circuit struck these amounts from the award, ruling that the expenses were not connected closely enough to the fraudulent conduct. See id. at 870; see also United States v. Kenney, 789 F.2d 783, 784 (9th Cir.1986) (invalidating that portion of a restitution order which was designed to reimburse the corporate victim for the cost of having its employees testify at the defendant's trial, but upholding that part of the order encompassing the cost of removing film chronicling the robbery from the bank's surveillance cameras). 51 Typical of the situations in which but for causation existed but restitution was denied because the claimed losses were temporally remote is Holley, in which the court deemed restitution improper when the victim, who received foreclosure property from the defendant in the course of the criminal activity, unnecessarily held onto the property for a lengthy interval after the crime was discovered, and the property declined in value during that period. 23 F.3d at 914-15. Similarly, in Tyler, the defendant cut down a tree in a national forest and was apprehended as he tried to take it to a nearby lumber mill. 767 F.2d at 1351. The government retained the lumber, needlessly, for a long period of time, then sold it in a fallen market for considerably less than it would have fetched if sold promptly. See id. The district court ordered restitution, pegging the loss by reference to the reduced price. The appellate court disagreed, pointing out that, although abstract but for causation existed, it was too attenuated to support the award. See id. at 1351-53. 52 Consistent with these two principles and with our dictum in Neal, 36 F.3d at 1201 & n. 10, we hold that a modified but for standard of causation is appropriate for restitution under the VWPA. This means, in effect, that the government must show not only that a particular loss would not have occurred but for the conduct underlying the offense of conviction, but also that the causal nexus between the conduct and the loss is not too attenuated (either factually or temporally). The watchword is reasonableness. A sentencing court should undertake an individualized inquiry; what constitutes sufficient causation can only be determined case by case, in a fact-specific probe. 53
54 Having elucidated the appropriate legal standard, we turn finally to the causation questions embedded in the appeals that are before us. These appeals, like the decisions canvassed above, provide some insights into the standard's operation. 55 1. In Vaknin's case, restitution is appropriate. The district court specifically found that the bribes which Vaknin paid were a but for cause of the Bank's losses on the defaulted loans. The record contains no basis on which to mount a credible challenge to this finding. After all, the arrangements for the bribes preceded the making of the loans, and the bribes were admittedly paid in exchange for Annarummo's assistance in procuring the loans. 56 Moreover, common sense must inform inquiries into restitution under the VWPA. See S.Rep. No. 532, supra, 1982 U.S.C.C.A.N. at 2536-37. In Vaknin's case, the evidence clearly shows not only that the loans were procured by bribery but also that the bribe-taker connived to bend the rules; in at least one instance Annarummo shaded the presentation to APSB's credit committee to increase the likelihood that the loan would be forthcoming. We believe that where, as here, the government establishes that arrangements for a bribe precede and relate to the making of a loan, a commonsense inference arises that subsequent losses referable to the loan's uncollectibility are causally linked in reasonable proximity to the bribe. Cf., e.g., Blinzler v. Marriott Int'l, Inc., 81 F.3d 1148, 1158-59 (1st Cir.1996) (discussing commonsense inference that arises from proof that a relevant document has been destroyed); United States v. Olbres, 61 F.3d 967, 971-72 (1st Cir.) (discussing commonsense inference that arises in tax evasion case from proof of expenditures in excess of declared income and disposable assets), cert. denied, --- U.S. ----, 116 S.Ct. 522, 133 L.Ed.2d 430 (1995). Of course, the inference can be rebutted if the defendant produces specific evidence of factual or temporal remoteness. Here, however, Vaknin made no such showing. To the contrary, there is no compelling proof either of an unforeseeable intervening cause or of any cognizable remoteness, factual or temporal. 57 That ends the matter. Because the record adequately supports Judge Boyle's finding of but for causation, and contains no sufficient suggestion of factual or temporal remoteness, restitution for the losses resulting from the tainted loans is altogether appropriate. 58 2. We treat Fonseca's and Yeghian's appeals in tandem. In both instances, the record is so exiguous that the very existence of but for causation seems problematic. As to Fonseca, the single loan in respect to which the court ordered restitution may have been approved by the Bank independent of, and prior in time to, Annarummo's solicitation of a bribe. 8 On the present record, we simply cannot tell--and the lower court made no specific finding on the point. The question is potentially important because, if it turns out that the Bank approved the loan prior to any arrangements for a bribe, then in such event the circumstances would not support an inference of but for causation; and, in the absence of such an inference, it is difficult (although not impossible) to conceive how a sufficient causal link between bribe and loss could be forged. 59 Moreover, the record suggests that even if but for causation exists, the requisite connectedness might be lacking. Fonseca argues with some force that the Bank's loss, if one occurred at all, was occasioned by its need for an immediate cash infusion; that this exigency gave birth to the FA; and therefore, no cognizable loss occurred. 9 But this argument, too, depends on facts which the record does not contain, and on which the lower court made no particularized findings. It is clear that Fonseca's loan was overdue and that the Bank had a right to call the loan. From that point forward, it is unclear whether the Bank entered into the FA merely as a quick fix for its own problems or because it wanted to mitigate an inevitable loss. 60 As to Yeghian, the record is similarly inexplicit about the timing of his arrangements with Annarummo vis-a-vis the Bank's approval of the subject loans. There is some indication that one (if not both) of the loans on which he defaulted may have been approved independent of any deal with Annarummo, but the sentencing court made no detailed findings and the extant record is too sparse to permit us to answer the causation questions with confidence. 61 It would be unprofitable to delve more deeply into these matters. We are confronted by a largely undeveloped record, embellished with few specific findings. Given that enigmatic reality, remand is required. We envision that the district court, the next time around, will direct the parties to augment the record with respect to (a) the presence or absence of a causal link between Fonseca's and Yeghian's criminal conduct and the FDIC's losses, (b) if that causal link is demonstrated, the closeness of the connection, factually and temporally, between that conduct and the ultimate losses, and (c) such other matters as the court may deem suitable. We anticipate further that the court will make particularized findings on each disputed issue. We intimate no view as to the proper outcome of those proceedings.