Opinion ID: 794551
Heading Depth: 2
Heading Rank: 1

Heading: Boccagna's Challenge and the Standard of Review

Text: 18 The MVRA mandates that [n]otwithstanding any other provision of law, a sentencing court shall order defendants convicted of certain crimes to make restitution to their victims. 18 U.S.C. § 3663A(a)(1); see United States v. Reifler, 446 F.3d at 113. In the case of a crime resulting in damage to or loss or destruction of property of a victim, the statute further provides that the order of restitution shall require the defendant to 19 (A) return the property to the owner of the property or someone designated by the owner; or 20 (B) if return of the property under subparagraph (A) is impossible, impracticable, or inadequate, pay an amount equal to — 21 (I) the greater of — 22 (I) the value of the property on the date of the damage, loss, or destruction; or 23 (II) the value of the property on the date of sentencing, less 24 (ii) the value (as of the date the property is returned) of any part of the property that is returned. 25 Id. § 3663A(b)(1). On this appeal, we focus primarily on subpart (B) of this MVRA provision. 26 In challenging the restitution order in his case, Boccagna does not dispute that his fraud crime of conviction falls within the MVRA mandate. See id. § 3663A(c)(1)(A)(ii) (stating that MVRA applies in all sentencing proceedings involving an offense against property under this title, including any offense committed by fraud or deceit). Nor does he challenge HUD's status as a victim of his offense that incurred out-of-pocket loss. See id. § 3663A(a)(2) (defining victim). Instead, he claims that HUD is not entitled to any restitution award because its loss was fully compensated by the fair market value of the foreclosure properties to which it acquired title. See id. § 3663A(b)(1)(B)(ii). In opposing this argument, the government does not dispute that, pursuant to § 3663A(b)(1)(B)(ii), HUD's out-of-pocket loss was appropriately offset by recouped collateral. 2 It submits simply that the district court acted within its discretion in valuing this collateral at HUD's nominal resale price to HPD without regard to its fair market value. 27 In general, we review an MVRA order of restitution deferentially, and we will reverse only for abuse of discretion. United States v. Reifler, 446 F.3d at 120; United States v. Harris, 302 F.3d 72, 75 (2d Cir.2002) ( per curiam ). To identify such abuse, we must conclude that a challenged ruling rests on an error of law, a clearly erroneous finding of fact, or otherwise cannot be located within the range of permissible decisions. United States v. Gonzalez, 420 F.3d 111, 120 (2d Cir.2005) (internal quotation marks omitted). To the extent Boccagna contends that the district court erred as a matter of law in using a nominal resale price rather than fair market value to calculate offset value in this case or in including collateral damages within HUD's loss, he raises questions of law that we review de novo. See United States v. Reifler, 446 F.3d at 120; United States v. Ekanem, 383 F.3d 40, 42 (2d Cir.2004); see also United States v. Simmonds, 235 F.3d 826, 829 (3d Cir.2000) (reviewing de novo district court's use of replacement value to measure loss under MVRA); United States v. Shugart, 176 F.3d 1373, 1375 (11th Cir.1999) (same). 28 B. Boccagna Fails to Identify the Fair Market Value of the Foreclosure Properties on the Date of HUD's Acquisition 29 Before discussing Boccagna's argument that the district court was obliged to calculate the offset value of the foreclosure properties by reference to their fair market value, we note that he fails to identify that value in the record. Although the August 20, 2004 addendum to Boccagna's PSR states that recent appraisals conclude that the value of the foreclosure properties equals HUD's loss, PSR Addendum at 1, these appraisals are not available for our review because they are not part of the record on appeal. In any event, because they appear not to have been conducted until sometime in 2004, their relevancy to a determination of offset value is questionable. 30 The MVRA plainly states that offset value must be determined as of the date property is recouped by the victim. See 18 U.S.C. § 3663A(b)(1)(B)(ii) (requiring offset value to be determined as of the date the property is returned). Because HUD's acquisition of the foreclosure properties preceded the referenced appraisals by several years, it is by no means obvious that the 2004 appraisals provide a reliable measure of the properties' fair market value as of the date specified in the MVRA. Thus, to the extent the district court, on remand, will need to consider the fair market value of the foreclosure properties in calculating an offset against loss, the parties should be prepared to produce evidence of fair market value on the date when title passed to HUD. 31 C. Although the MVRA Does Not Mandate the Use of Fair Market Value to Value Property, Nominal Resale Price Cannot Be Used as the Measure of Property Value 32 1. The Plain Language of the MVRA Does Not Mandate a Single Measure of Property Value 33 In considering whether the MVRA requires property to be valued by reference to fair market value, we begin with the text of the statute. See Robinson v. Shell Oil Co., 519 U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997); Marvel Characters, Inc. v. Simon, 310 F.3d 280, 289-90 (2d Cir.2002). If the statutory language is unambiguous on this point, and the statutory scheme is coherent and consistent, no further inquiry is required. Robinson v. Shell Oil Co., 519 U.S. at 340, 117 S.Ct. 843 (internal quotation marks omitted). In determining whether statutory language is unambiguous, we reference. . . the language itself, the specific context in which that language is used, and the broader context of the statute as a whole. Id. at 341, 117 S.Ct. 843; accord Daniel v. Am. Bd. of Emergency Medicine, 428 F.3d 408, 423 (2d Cir.2005). Only if we conclude that statutory language is ambiguous do we resort . . . to canons of construction and, if the meaning [still] remains ambiguous, to legislative history. Daniel v. Am. Bd. of Emergency Medicine, 428 F.3d at 423. 34 The MVRA employs the term value in two separate, but interrelated, clauses necessary to the calculation of a restitution award. Title 18 U.S.C. § 3663A(b)(1)(B)(I) references the value of the [victim's] property that was damaged, lost, or destroyed as a result of the crime of conviction. 18 U.S.C. § 3663A(b)(1)(B)(I) (emphasis added). Subsection (ii) references the value . . . of any part of the property that is returned, in other words, the offset value. Id. § 3663A(b)(1)(B)(ii) (emphasis added). Thus, the MVRA unambiguously tells a court what to value (the property lost; the property returned) and even when to value it (in the case of the loss value, property is evaluated on the date of the damage, loss, or destruction, id. § 3663A(b)(1)(B)(i)(I), or on the date of sentencing, id. § 3663A(b)(1)(B)(i)(II), whichever is greater; in the case of offset value, property is evaluated as of the date the property is returned, id. § 3663A(b)(1)(B)(ii)). The statute is silent, however, on the question of how the referenced property is to be valued. See United States v. Simmonds, 235 F.3d at 831 (observing that MVRA is silent as to which . . . measure[ ] should be used to determine the value of the property); cf. Associates Commercial Corp. v. Rash, 520 U.S. 953, 961, 117 S.Ct. 1879, 138 L.Ed.2d 148 (1997) (observing that § 506(a) of the Bankruptcy Code does speak to the how question of valuation for specified property (emphasis in original)). Notably, nowhere does the statute reference fair market value as the only measure to be used in making the restitution calculations contemplated by § 3663A(b)(1)(B). Cf. BFP v. Resolution Trust Corp., 511 U.S. 531, 537, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994) (declining, in bankruptcy context, to use fair market value as measure of property value, noting that the well-established term did not appear in the relevant statute although it was referenced in other provisions of law). Rather, the law appears to contemplate the exercise of discretion by sentencing courts in determining the measure of value appropriate to restitution calculation in a given case. Title 18 U.S.C. § 3664(f)(1)(A) states that a court shall order restitution to each victim in the full amount of each victim's losses as determined by the court and without consideration of the economic circumstances of the defendant. (emphasis added). Accordingly, because the law recognizes a number of reasonable measures of property value, see BFP v. Resolution Trust Corp., 511 U.S. at 543 n. 7, 114 S.Ct. 1757 (discussing use of foreclosure price as measure of value in bankruptcy proceeding); United States v. Simmonds, 235 F.3d at 832 (using replacement value rather than fair market value in calculating restitution), we 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, see generally Sutton v. United Air Lines, Inc., 527 U.S. 471, 496, 119 S.Ct. 2139, 144 L.Ed.2d 450 (1999) (holding that statutory language should be construed in light of the purposes Congress sought to serve); United States v. Duverge Perez, 295 F.3d 249, 254 (2d Cir.2002) (A district judge has broad discretion as to what types of procedure are needed at a sentencing proceeding for determination of relevant disputed facts.) (internal quotation marks omitted). 35 2. Value Determinations Must Serve the Compensatory Purpose of the MVRA 36
37 In determining the appropriate measure of value for property relevant to restitution, a district court must consider that the purpose of restitution is essentially compensatory: to restore a victim, to the extent money can do so, to the position he occupied before sustaining injury. See Hughey v. United States, 495 U.S. 411, 416, 110 S.Ct. 1979, 109 L.Ed.2d 408 (1990) (observing that the meaning of `restitution' is restoring someone to a position he occupied before a particular event); United States v. Coriaty, 300 F.3d 244, 253 (2d Cir.2002) (holding that statutory focus of the MVRA is upon making victims whole). Because the MVRA mandates that restitution be ordered to crime victims for the full amount of losses caused by a defendant's criminal conduct, see 18 U.S.C. § 3664(f)(1)(A); United States v. Reifler, 446 F.3d at 134 (remanding where calculation errors violated the MVRA requirement that the order [of] restitution award restitution in the full amount of the victims' losses), it can fairly be said that the primary and overarching purpose of the MVRA is to make victims of crime whole, to fully compensate these victims for their losses and to restore these victims to their original state of well-being. United States v. Simmonds, 235 F.3d at 831. 38 In most circumstances, fair market value will be the measure most apt to serve this statutory purpose. Fair market value is defined as the price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm's-length transaction. Black's Law Dictionary 1587 (8th ed.2004); see also Gillespie v. United States, 23 F.3d 36, 40 (2d Cir. 1994) (defining fair market value as `the price at which the property would change hands between a willing buyer and a willing seller') (quoting United States v. Cartwright, 411 U.S. 546, 551, 93 S.Ct. 1713, 36 L.Ed.2d 528 (1973)); Restatement of Restitution § 151 cmt. b (1937) (defining value of property acquired by consciously tortious conduct as the amount for which it could be exchanged if there were an open market with a wide opportunity for buyers). Because this price reflects the value of property's greatest economic use, it generally provides the most reliable measure of both the full loss sustained by a victim when his property is damaged, lost, or destroyed, and the degree to which that loss is mitigated by recouped property. 39
40 Notwithstanding the general reliability of fair market value as a measure of property value, in some circumstances other measures of value may more accurately serve the statutory purpose to ensure a crime victim's recovery of the full amount of his loss. 41 For example, when the actual cash value of the damaged, lost, or destroyed property is difficult to ascertain — because an item is unique, or because there is not a broad and active market for it, replacement cost rather than fair market value may better compensate a victim for the full amount of his loss. United States v. Shugart, 176 F.3d at 1375. In Shugart, the property at issue was a century-old Georgia church destroyed by arson. As the Eleventh Circuit noted, a church is hardly a fungible commodity for which congregations may trade in an active market. Id. Rather, a church is a unique property, valued by its members precisely because of its location, its design, and the memories it evokes. Id. Because the market would not necessarily factor all these considerations into its determination of value, Shugart concluded that the only effective way to return to the victims the fair equivalent of what they lost was to award restitution by reference to replacement value so that the congregation could rebuild a church comparable in size and design on the same lot where the original church stood. Id. 42 Following Shugart, the Third Circuit has also used replacement rather than fair market value in awarding restitution to an arson victim for the loss of residential furniture. See United States v. Simmonds, 235 F.3d at 831. Although the furniture was not unique, the court concluded that it had a personal value to its owners that could not be captured or accurately estimated by simply determining [its] market value. Id. at 832. 43 Obviously, a concern for the unique or personal value of property is more apt to arise with respect to property lost, rather than substitute property recouped, by the victim. Because substitute property is recouped by a crime victim in lieu of the cash compensation to which he would otherwise be entitled as restitution for his loss, see generally United States v. Oren, 893 F.2d 1057, 1066 (9th Cir.1990) (observing that if victim declines to accept land offered in compensation for loss, defendant must pay restitution without benefit of an offset), the offset value of such property is generally best determined by reference to the cash it would bring the victim in a sale on the open market. We recognize that, in some circumstances, the market for recouped property may be poorly developed or non-existent. For example, where collateral is subject to foreclosure proceedings, a sentencing court may consider whether a forced-sale price most accurately represents its fair market value on the date of acquisition. Cf. BFP v. Resolution Trust Corp., 511 U.S. at 539, 114 S.Ct. 1757 (noting that property that must be sold within [foreclosure] strictures is simply worth less  (emphasis in original)). 3 44 In any event, because the MVRA does not, in haec verba, require a district court to value property only by reference to fair market value, and because other measures of value may, in appropriate circumstances, provide a more accurate measure of the full amount of a victim's loss, we decline to hold that, as a matter of law, district courts may only use fair market value in making the property calculations contemplated by 18 U.S.C. § 3663A(b)(1)(B). 45 3. A Nominal Sale Price Cannot Be Used to Measure Offset Value Because It Affords the Victim a Windfall 46 Although we recognize a sentencing court's discretion, when fashioning a restitution award, to value property by reference to measures other than fair market value, that discretion is necessarily circumscribed by an important caveat: the MVRA does not permit awards in excess of the amount of the [victim's] loss. United States v. Nucci, 364 F.3d at 423; see also id. (observing that reading the [MVRA] to provide recovery in excess of the amount of the loss would be in derogation of the common law, which Congress has not clearly and unequivocally . . . authorize[d]). In short, a sentencing court cannot order restitution that goes beyond making [the victim] whole. United States v. Gordon, 393 F.3d 1044, 1060 (9th Cir. 2004); United States v. Dawson, 250 F.3d 1048, 1050 (7th Cir.2001) (holding that victim should not receive anything more in restitution than is required to make [it] whole). It cannot award the victim a windfall, i.e., more in restitution than he actually lost. United States v. Arutunoff, 1 F.3d 1112, 1121 (10th Cir.1993); see United States v. Stanley, 309 F.3d 611, 613 (9th Cir.2002) (holding MVRA does not allow double recovery by a victim). 47 Mindful of this principle, we conclude that when recouped property is resold at a nominal price, a court abuses its discretion in using that price to calculate offset value because such a calculation necessarily exceeds the amount necessary to make the victim whole. 4 It effectively awards the victim both restitution in the full amount of loss offset only by the nominal sale price and the benefit of the recouped property to the extent that the victim is able to make a gift to a putative purchaser in an amount equal to the difference between the property's fair market value and the nominal sale price. Such a valuation method does not put the victim in the same position he would have been in but for the defendant's criminal conduct; it puts him in a better position. 48 A concrete example illustrates the point. If a theft victim suffered the loss of a jewel with a fair market value of $100,000, and if he thereafter recouped from the defendant a substitute jewel with a market value of $50,000, and if the victim sold the substitute jewel to his son for $1, the use of that nominal sale price as offset value would allow the victim to receive the benefit of both a $49,999 gift to his son, and $99,999 in restitution from the defendant, for a total recovery of $149,998 on his $100,000 loss. Plainly, such a restitution calculation would put the victim in a significantly better position than he was in before the theft. 5 49 The government submits that HUD's transfers of foreclosure properties to HPD are distinguishable because the challenged nominal sale prices were agreed to pursuant to the agency's mission to promote affordable low income housing. As HUD explains in its brief: 50 HUD's sales [to HPD] were made pursuant to a program designed to further the agency's mission. . . . In accordance with this purpose it . . . conveyed the properties to HPD at [nominal] amounts that furthered the program goals of protecting tenants, ensuring quality restoration of the buildings, and creating affordable housing opportunities. 51 . . . 52 If . . . HUD had been required simply to sell to the highest bidder, there would have been no guarantee that these properties would actually be developed or that they would be used as affordable housing. . . . [U]nder the circumstances, the only reasonable option available to HUD was to convey the properties to HPD. 53 Appellee Br. 11-12. 54 However laudable HUD's motives in entering into its agreement with HPD, that fact does not help us resolve this appeal. The issue before us is not, after all, whether the district court could insist that HUD sell the foreclosure properties to the highest bidder. It could not. The issue is whether HUD's voluntary decision to sell the foreclosure properties at a nominal rather than fair market price entitles it to recoup the difference between these two amounts as part of a restitution award against Boccagna. 55 Preliminary to answering this precise question, we reiterate our earlier observation that the MVRA requires recouped property to be valued as of the date it is received by the victim. See 18 U.S.C. § 3663A(b)(1)(B)(ii). Because HUD did not reach a sale agreement with HPD until January 2002, some time after HUD itself acquired title to the foreclosure properties, its resale price to HPD — whether nominal or not — would not appear to be a timely measure of value. 6 56 More to the point, although HUD is a government entity, nothing in the plain language of the MVRA draws a distinction between government and private victims for purposes of calculating restitution. Because no victim can recover restitution in an amount that exceeds its loss, we necessarily conclude that calculating offset value by reference to a nominal sale price is no more permissible when the victim is a government agency than when the victim is an individual or private entity because such a calculation inevitably results in a windfall to the victim. 57 By taking title to the foreclosure properties, HUD acquired the ability to defray its $20,609,746 out-of-pocket loss by whatever dollar amount the highest bidder would have paid for those properties in an arm's-length market transaction conducted contemporaneous to the transfer. That dollar amount represents the reasonable offset value of the properties. The difference (if any) between $20,609,746 and that sale dollar amount represents the restitution award necessary to compensate HUD in the full amount of its loss. 58 When, instead of selling the foreclosure properties on the open market, HUD opted to transfer the properties to HPD, the properties' value was not thereby reduced to the nominal price. Indeed, if the properties had been destroyed by arson on the eve of transfer to HPD, we expect HUD would vigorously challenge the arsonist's argument that the nominal price represents the value of the property for purposes of calculating his restitution obligations to HUD. In any event, the nominal price was not the only value HUD received for the properties. It also obtained HPD's guarantee that the properties would be developed as low-to-middle income residences. Like the recouped jewel in our earlier hypothetical, this guarantee had a value to HUD equal, at least, to the market price that it decided to forego. A sentencing court cannot allow HUD to receive both the benefit of this development guarantee and a restitution award offset only by a nominal sale price. To do so would place it in a better position than it was in before it agreed to guarantee the 203(k) loans. It would obligate Boccagna both to compensate HUD for the full amount of its out-of-pocket loss (less only HPD's nominal payments) and to subsidize the sale to HPD at least in the amount for which the fair market value of the property exceeded what HPD paid. 7 59 In urging a contrary conclusion, HUD submits that its fraudulently induced 203(k) loan guarantees were premised on the borrowers' promise to develop the properties as low-to-middle income residences. In short, it argues that it obtained nothing more from HPD than it had expected from the deceitful borrowers. HUD may well be entitled to sue the borrowers and their confederates for the benefit of its guarantee bargain, but the MVRA is not the vehicle to obtain what would, in effect, be expectation damages. 60 Expectation damages strive to place an aggrieved party in the same economic position it would have been in had both parties fully performed their contractual obligations. Bausch & Lomb v. Bressler, 977 F.2d 720, 729 (2d Cir.1992). Criminal restitution, on the other hand, is not concerned with a victim's disappointed expectations but only with his actual loss. As we have already observed, restitution attempts to compensate for loss by restoring [the victim] to a position he occupied before [the injurious] event. Hughey v. United States, 495 U.S. at 416, 110 S.Ct. 1979; cf. Restatement (Second) of Contracts § 384, cmt. a (1981) (noting that restitution strives to return the parties, as nearly as is practicable, to the situation in which they found themselves before they made the contract). 61 Before Boccagna and his confederates fraudulently induced HUD to guarantee 203(k) loans on the foreclosure properties, HUD was richer by $20,609,746. To the extent Boccagna could have compensated HUD with cash in this amount, HUD would have had no further restitution claim based on its failed expectations about the properties' development. When, instead of recouping cash, HUD took title to the foreclosure properties, the proper offset value of these properties was the dollar amount they could have commanded in a timely exchange on the open market. HUD's voluntary decision to sell these properties for a lesser nominal price to a buyer willing to provide it with a desired development guarantee did not lessen this offset value. 8 62 Accordingly, because we conclude that a nominal sale price cannot reliably measure offset value when property has a higher fair market value, we remand this case to the district court for it to determine the fair market value of the foreclosure properties at the time HUD acquired title and to offset that amount against the $20,609,746 out-of-pocket loss sustained in this case. 9 63 D. The Order of Restitution Did Not Compensate for Consequential Loss 64 Boccagna argues that the district court erred when it accepted as part of HUD's loss calculation such consequential losses as interest on the loans, maintenance fees, taxes, and selling expenses. Appellant Br. at 16. We disagree. 65 Preliminarily, we observe that, because this challenge was not presented to the district court, we review only for plain error, and we find none in this case. See United States v. Olano, 507 U.S. 725, 732, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993) (noting that a plain error is one that prejudicially affects a defendant's substantial rights and seriously affect[s] the fairness, integrity or public reputation of judicial proceedings); accord United States v. Snype, 441 F.3d 119, 138 (2d Cir.2006). 66 Consequential losses are losses beyond those which naturally and directly flow from the defendant's wrongdoing. Globecon Group, LLC v. Hartford Ins. Co., 434 F.3d 165, 176 (2d Cir.2006). We are satisfied from the record that HUD's $20,609,746 out-of-pocket loss all flowed naturally and directly from the collapse of Boccagna's fraud scheme. As guarantor of the loans fraudulently obtained through this scheme, HUD was required to pay out of pocket the borrowers' defaulted obligations, including interest. To the extent HUD minimized its out-of-pocket loss by obtaining clear title to the foreclosure properties that secured the loans, it was only able to do so by paying various taxes and foreclosure expenses. Boccagna can hardly claim an offset credit based on the fair market value of these recouped properties without also factoring HUD's costs in that calculation. 10 67 Accordingly, we reject Boccagna's consequential loss challenge as without merit.