Opinion ID: 767352
Heading Depth: 3
Heading Rank: 2

Heading: Enhancement for Violation of Judicial Process

Text: 70 The District Court enhanced Thayer's sentence by two levels for violation of any judicial or administrative order, injunction, decree, or process not addressed elsewhere in the guidelines.... U.S.S.G. S 2F1.1(b)(4)(B) (1998). The District Court relied on the probation office's finding, asserted by the government, that such an enhancement is appropriate whenever a defendant is convicted of concealing assets in a bankruptcy case. Thayer argues the enhancement can be given only when a specific court order is violated. 71 Several courts of appeals have taken the position now advanced by the government. Most have reasoned that a bankruptcy proceeding constitutes a judicial... process under 2F1.1(b)(4)(B), a process violated by concealment of assets. As the Court Appeals for the Eighth Circuit explained, 72 Lloyd [the debtor] did not violate a specific judicial order, injunction, or decree; however, Lloyd did violate a judicial process by fraudulently concealing assets from the bankruptcy court officers. Lloyd sought protection from his creditors under the shelter of bankruptcy when he filed his Chapter 11 petition. Lloyd then abused the bankruptcy process and hindered the orderly administration of bankruptcy estate by concealing assets. 73 United States v. Lloyd, 947 F.2d 339, 340 (8th Cir. 1991) (per curiam); accord United States v. Guthrie, 144 F.3d 1006, 1010-11 (6th Cir. 1998); United States v. Messner, 107 F.3d 1448, 1457 (10th Cir. 1997); United States v. Welch, 103 F.3d 906, 908 (9th Cir. 1996) (per curiam); United States v. Michalek, 54 F.3d 325, 332-33 (7th Cir. 1995). Some courts have applied the enhancement on a separate theory, holding the Bankruptcy Rules and Forms constitute orders of the court: 74 Black's Law Dictionary defines the word order as follows: A mandate; precept; command or direction authoritatively given; rule or regulation. The mandate of the Bankruptcy Rules and Official Forms that a debtor truthfully disclose assets and liabilities falls within this definition. Moreover, the mandate is in the context of formal, adversary court proceedings, and Bellew [the debtor] necessarily knew that he was violating the mandate when he signed the declarations required by Form Numbers 1 and 6. 75 United States v. Bellew, 35 F.3d 518, 520-21 (11th Cir. 1994) (per curiam) (footnote omitted); accord Michalek, 54 F.3d at 332-33; United States v. Saacks, 131 F.3d 540, 545 (5th Cir. 1997). Several of these courts have emphasized the broad applicability of U.S.S.G. S 2F1.1, the base offense provision for fraud, and the need to punish bankruptcy fraud more severely than other types of fraud: 76 [I]n neither S 2F1.1 nor any other section of the Guidelines is there either a base offense level or an enhancement provision for bankruptcy fraud as such. Consequently, were we to stop with the general sentencing provisions for fraud, we would fail to make any distinction between the most pedestrian federal fraud offense and bankruptcy fraud with all of its implications of a scheme to dupe the bankruptcy court, the trustee, and the creditor or creditors of the debtor, i.e., the entire federal system of bankruptcy. 77 Saacks, 131 F.3d at 543-44; accord Guthrie, 144 F.3d at 1010 ([T]he Sentencing Guidelines' fraud provision is a very broad guideline encompassing a wide variety of offenses; because bankruptcy fraud involves a higher level of culpability due to its deception of the court, the offense warrants a greater punishment.); Michalek, 54 F.3d at 332. 78 Although these arguments have merit, we are not convinced. Instead we are persuaded by the analyses of the Courts of Appeals for the First and Second Circuits. See United States v. Shadduck, 112 F.3d 523, 530 (1st Cir. 1997) (reaching only the claim that the Bankruptcy Rules and Forms constitute orders of the court); United States v. Carrozzella, 105 F.3d 796, 800 (2d Cir. 1997) (expressing skepticism about the enhancement of bankruptcy fraud cases under S 2F1.1(b)(4)(B), but ultimately reversing on other grounds). Both courts relied in part on the commentary to S 2F1.1(b)(4)(B), which, in its current form, explains that the section 79 provides an adjustment for violation of any judicial or administrative order, injunction, decree, or process. If it is established that an entity the defendant controlled was a party to the prior proceeding, and the defendant had knowledge of the prior decree or order, this provision applies even if the defendant was not a specifically named party in that prior case. 80 U.S.S.G. S 2F1.1, comment. (n.6). 81 The comment's reference to the prior decree or order seems to suggest that the drafters expected this subsection to be applied only to defendants who violated an order arising out of a previous judicial proceeding, although this is unclear. But the crucial inquiry here appears to focus on the proper interpretation of the term judicial process. While this term could be read to encompass an entire judicial proceeding, e.g. the entire bankruptcy proceeding, it seems more likely it was intended to be applied in a more circumscribed manner. 82 As the Second Circuit reasoned, 83 Violation strongly suggests the existence of a command or warning followed by disobedience. This analysis in turn suggests that the term process--the command or warning violated--is used, not in the sense of legal proceedings generally, but in the sense of a command or order to a specific party, such as a summons or execution issued in a particular action. This narrower reading of Section [2F1.1(b)(4)(B)] is also consistent with the general practice--known as ejusdem generis--of construing general language in an enumeration of more specific things in a way that limits the general language to the same class of things enumerated. In the present circumstances, the word process follows injunction, order, [or] decree and is most easily read in the narrower sense of a command or order issued to a specific person or party. 84 Carrozzella, 105 F.3d at 800 (citations omitted, second alteration in original). We agree. 85 We also agree with the Court of Appeals for the First Circuit that the Rules and Forms of the Bankruptcy Court in the sentencing context are not judicial orders, injunctions, decrees, or processes. The Bankruptcy Rules and Forms have more in common with statutes and procedural rules of general application than with orders of the court, which are directed to identified parties and indicate in specific terms what those parties are required to do. See Shadduck, 112 F.3d at 530. 86 In reaching its holding, the Court of Appeals for the First Circuit looked to the commentary guidelines for assistance, which provide: 87 A defendant who has been subject to civil or administrative proceedings for the same or similar fraudulent conduct demonstrates aggravated criminal intent and is deserving of additional punishment for not conforming with the requirements of judicial process or orders issued by federal, state, or local administrative agencies. 88 U.S.S.G. S 2F1.1, comment. (backg'd.). The Court of Appeals for the First Circuit found the commentary supported its conclusion that the violation of a bankruptcy rule does not require an enhancement under U.S.S.G. S 2F1.1(b)(4)(B): 89 The accompanying exemplar describes a defendant who has been enjoined in a prior proceeding from engaging in certain conduct, but who violated the injunction anyway by committing the fraud for which he was awaiting sentence. (Citation omitted). Thus, the commentary makes clear that the rationale for the enhancement is to redress the `aggravated criminal intent' inherent in violating a prior order specifically enjoining the defendant, or any entity the defendant controlled, from engaging in fraudulent conduct which formed the basis for the offense of conviction. U.S.S.G. S 2F1.1, comment. (backg'd). 90 Shadduck, 112 F.3d at 529. We concur. Nothing in the guidelines suggests the drafters intended as a general matter to sentence bankruptcy fraud more strictly than other types of fraud. Therefore, we find the enhancement granted here is not appropriate under S 2F1.1(b)(4)(B). 15