Opinion ID: 808490
Heading Depth: 2
Heading Rank: 2

Heading: Inclusion of Other Expenditures

Text: In addition to challenging the district court’s use of the eventual resale price of the foreclosed real estate as the offset value, Robers also argues on appeal that the district court erred in including various other expenditures in the restitution award related to the Grant Street real estate. The Inlet Shores restitution award was based solely on the difference between loan amount and the resale amount, so there is no additional issue there. But with the Grant Street real estate, the restitution awarded was based on the following figures: 38 No. 10-3794 Claim: Unpaid Principal balance $140,478.91 Accrued interest $ 13,698.36 Attorney fees $ 1,400.00 Property taxes $2,478.10 Other expenses $450.00 Hazard Insurance $485.00 Property preservation $736.54 Statutory Disbursement $1,311.56 Less ending escrow balance ($1,823.56) Total Claim paid: $159,214.91 Additional expenses after MGIC took over ownership: Insurance $374.51 Utilities $112.69 Title Commitment $325.00 Broker price opinion $119.00 Claim investigation costs $715.00 Total Expenses: $1,646.20 Recovery from sale: Sales Price $118,000.00 Broker’s commission ($8,080.00) Prorated taxes ($1,724.68) Title Policy ($607.00) Settlement charges ($679.39) Net Proceeds $107,908.93 Total Loss $52,952.18 No. 10-3794 39 In challenging these line-item expenses, Robers merely argues that the district court did not adequately explain how or why they should be included. And then he stresses that consequential and incidental expenses are not recoverable. The only specific line-item expenses, though, for which he develops an argument are “attorney’s fees” and “other expenses.” This court has held that attorney’s fees expended in pursuing litigation are not recoverable, Shepard, 269 F.3d at 887, but they are recoverable if they represent damage to the property or are incurred as part of an investigation for the prosecution. Scott, 405 F.3d at 620. Because we lack sufficient detail to know on which line these attorney’s fees fall, we vacate that portion of the restitution award. Similarly, because we cannot know what “other expenses” means and thus whether they are recoverable, we vacate that portion of the restitution award as well. We reject, however, Robers’s claim that the district court did not adequately explain why it included the other miscellaneous expenditures in the restitution award. After stating that it had read the parties’ restitution memoranda and the defense’s objections, the district court explained: The trend is, I think—and the thrust of Seventh Circuit case law, and the thread that runs is becoming stronger in this fabric, is that these expenses aren’t going to be considered as consequential . . . . As the government has argued, these are fraud cases. It was a fraud that was perpetrated, which resulted in all of these actions that had to be taken but for 40 No. 10-3794 the fraud. And that’s not putting a person, a victim in this type of case, in a better place. It’s putting a victim back where the victim never should have gone and never would have been but for the conduct that was conducted by the defendant. . . . And I deem it to be the case in this case, as I deemed it to be in the Bradley Hollister case. . . . so consistent with the logic of it, I think that the logic is overwhelming, that the fraud was committed. The victim is owed, and he’s owed the direct expenses—I’ll call them direct expenses that flow from the fraud that would not have existed or not there—never would have been there. Robers believes that this discussion is insufficient, citing United States v. Hosking, 567 F.3d 329 (7th Cir. 2009), wherein the government presented only a single document with general and vague descriptions of the victim’s costs. Id. at 333. But the problem in Hosking was that the district court found that the costs were not appropriately included in restitution order and then, rather than determine the appropriate amount of restitution, merely cut the claimed costs in half. Id. at 334. Conversely, here the only component of the award that is unclear is the “other expenses” category, which we have vacated. And we reject Robers’s argument that the remainder of the restitution order was not sufficiently explained. As noted, other than his challenge to “attorney’s fees” and “other expenses,” Robers does not challenge individually the other line-item expenses, merely stating that they are all consequential or incidental expenses that cannot be recovered. We have held that con- No. 10-3794 41 sequential or incidental expenses are not compensable under the MVRA. Shepard, 269 F.3d at 887 (“Both § 3663A and its predecessor § 3663 have been understood to require restitution only for direct losses and not for consequential damages and the other effects that may ripple through the economy.”); United States v. Arvanitis, 902 F.2d 489, 497 (7th Cir. 1990) (“In the case of restitution for offenses resulting in the loss of property, 18 U.S.C. § 3663(b) limits recovery to property which is the subject of the offense, thereby making restitution for consequential damages, such as attorneys fees, unavailable.”). But we have also explained that the “direct” versus “consequential and incidental” demarcation is not exactly helpful. United States v. Scott, 405 F.3d 615, 620 (7th Cir. 2005). Rather, the better question is whether the injury is to “property,” which is recoverable under the MVRA, or other losses, which are not. Id. 619-20. In Scott, we explained this principle, while holding that an order of restitution appropriately included the cost of an audit: The audit expense, though a loss to Scott’s employers, was not a gain to him. But it was a form of damage to the [victim-] employers’ property. Suppose money was stolen from a bank and eventually returned, but the bank incurred a bookkeeping cost in determining whether the entire amount stolen had been re- turned. That cost would be a diminution in the value of the bank’s property, caused by the theft, and would therefore be a proper item for restitution. See United States v. Donaby, 349 F.3d 1046, 1051-54 (7th Cir. 42 No. 10-3794 2003); United States v. Rhodes, 330 F.3d 949, 953-54 (7th Cir. 2003); United States v. Hayward, 359 F.3d 631, 642 (3d Cir. 2004). This case is no different. Id. at 619. Like Scott, we conclude in this case that the remainder of the line-item expenses fall on the injury-to-property side of the line. The property damaged by Robers’s fraud was capital and to recoup that capital, Fannie Mae and then MGIC had to incur numerous expenses to safeguard, keep up, and dispose of the collateral that secured the loan. The only way MGIC was able to regain its capital at the end of the day, at the value it recovered on resale, was by expending cash up front. For instance, if real estate taxes were not current, the buyer’s offer would be lower by an equal amount. If title insurance were not provided, the purchase would be riskier and the buyer would be only willing to purchase at a lower price. If a realtor were not hired, the property would not be marketed as effectively, again leading to a lower amount. And maintenance and utilities expenses preserved the collateral, and insurance safeguarded the collateral while the victim attempted to mitigate the damage to its property. In other words, the amounts expended by the victim to achieve the final disposition of the collateral real estate were incurred solely to rectify, to the extent possible, the damage to the capital. These expenses are directly related to Robers’s fraud No. 10-3794 43 and are thus recoverable.1 4 Accordingly, we affirm the restitution award, other than the award for attorney’s fees and “other expenses,” which we vacate, and we remand for entry of judgment consistent with this opinion.