Opinion ID: 2978318
Heading Depth: 2
Heading Rank: 5

Heading: offset of the restitution obligation

Text: “We review de novo the question of whether restitution is permitted under the law, and review the amount of a restitution award for abuse of discretion.” Boring, 557 F.3d at 713.
Elson’s final argument on appeal is that he was entitled to an offset—in part or in whole—of his restitution obligation. First, he argues that Bourke released his claim for attorney fees in a settlement with Schultz, precluding the district court from including those fees in its restitution order. Second, Elson contends that McPeak’s return of certain judgments relieves Elson of his responsibility to pay restitution because the value of those judgments exceeds his restitution obligation. The MVRA contains several provisions that address the relationship between a district court’s restitution order and other sources of compensation for victims’ losses. See United States v. Bright, 353 F.3d 1114, 1122 (9th Cir. 2004). In addition to making restitution mandatory for certain crimes, the MVRA amended § 3663, allowing a district court to order restitution “for a loss for which the victim has received or is entitled to receive compensation.” Id. at 1121. Section 3664 reinforces this principle, directing district courts to order restitution in “the full amount of a victim’s loss . . . without regard to other sources of compensation for the victims.” Id. (emphasis removed); see 18 U.S.C. § 3664(f)(1)(B) (“In no case shall the fact that a victim has received or is entitled No. 07-3778 United States v. Elson Page 26 to receive compensation with respect to a loss from insurance or any other source be considered in determining the amount of restitution.”). As the court in Bright explained, any offsets stemming from a victim’s compensation from other sources are “to be handled separately as potential credits against the defendant’s restitution obligation—not as reductions in the amount of that obligation in the first instance.” Bright, 353 F.3d at 1121; see § 3664(f)(2) (“Any amount paid to a victim under an order of restitution shall be reduced by any amount later recovered as compensatory damages for the same loss by the victim . . . .”).
Elson first argues that the district court erred in including Bourke’s attorney fees in the restitution amount because Bourke released his claim for such attorney fees pursuant to a 1998 settlement with Schultz. As discussed above, in 1998, Bourke sold an attorney-fee claim of $962,000 then pending in California court to Elson, and also released his civil claims against Elson and several other co-defendants. During the restitution hearing, Bourke testified that the $962,000 in fees he sought in California court in connection with the Schultz litigation—the fees included in the claim he sold to Elson—comprised the same fees he listed in his victim statement of loss. In United States v. Bearden, 274 F.3d 1031 (6th Cir. 2001), this Court held “that a private settlement between a criminal wrongdoer and his victim releasing the wrongdoer from further liability does not preclude a district court from imposing a restitution order for the same underlying wrong.” Id. at 1041. Other circuits have reached similar conclusions. For example, in Gallant, the defendants settled with the banking institution victim for $60,000 in exchange for the victim’s agreement to release the defendants “from further liability.” 537 F.3d at 1249. The court found that the “settlement does not bar restitution” under the MVRA, noting that “[a] private settlement cannot abrogate [the mandatory] language” of the statute. Id. at 1250; see also United States v. Sheinbaum, 136 F.3d 443, 448 (5th Cir. 1998) (concluding that, because restitution is a penal rather than compensatory measure, a district court “possess[es] the discretion to impose restitution orders in spite of civil settlements”). Therefore, under No. 07-3778 United States v. Elson Page 27 Bearden and similar cases, the fact that Bourke settled his pending claims—including his fee petition—did not preclude the district court from awarding restitution. However, courts also have recognized that a defendant should not have to pay a victim for the same loss twice. In Bearden, although the court rejected the defendant’s argument that his $47,000 settlement with the victim prevented the sentencing court from ordering restitution, the court reduced the defendant’s restitution obligation by the amount the defendant paid in the settlement: In this case, Bearden would have his payment of $47,000 erase the rest of the $161,590 restitution imposed. As the Supreme Court [has] indicated . . . , the purposes of criminal restitution include punishment. It would be improper to permit private parties to release criminal wrongdoers from punishment. Thus, under our holding today Bearden still owes [the victim] $114,590 in restitution. Bearden, 274 F.3d at 1041; see also United States v. McDaniel, 398 F.3d 540, 555 (6th Cir. 2005) (noting that “the restitution statutes do not permit victims to obtain multiple recoveries for the same loss”). Thus, “when determining the amount of a restitution award under the MVRA, the court must ‘reduce restitution by any amount the victim received as part of a civil settlement’ . . . . to avoid[] the undesirable result of restitution effectuating a double recovery.” Gallant, 537 F.3d at 1250 (citation omitted). “[T]he burden of proving an offset should lie with the defendant.” Sheinbaum, 136 F.3d at 449. The restitution statute “allocates the various burdens of proof among the parties who are best able to satisfy those burdens.” Id. Because “the defendant should know the value of any compensation he has already provided to the victim in civil proceedings, . . . the burden should fall on him to argue for a reduction in his restitution order.” Id. Here, beyond proffering evidence of the settlement itself, Elson has not shown that Bourke received compensation for the attorney fees he now seeks. The record demonstrates that, although Bourke released his fee claim as part of the settlement, he never received compensation for the attorney fees. While Bourke received $2 million from Schultz in the settlement in exchange for the judgment worth approximately $2,052,000, his pending attorney-fee claim of $962,000 remained uncompensated. The district court therefore properly concluded that the settlement did No. 07-3778 United States v. Elson Page 28 not bar restitution for attorney fees and, thus, contrary to Elson’s argument, there was no double recovery.
Elson also argues that co-defendant McPeak’s agreement to return the judgments “in question to the government” satisfied Elson’s restitution obligation. (Def.’s Br. 1112; Def.’s Reply Br. 3-4). More specifically, Elson asserts that because the “property” taken from the victims was judgments, the victims have been made whole by McPeak’s return of the judgments. The government interprets Elson’s argument as asserting that the restitution order permits “double recovery,” and responds by noting that “there has been no recovery by the victims resulting from McPeak’s agreement to transfer the civil judgments to the government.” (Gov’t Br. 46-47.) Neither the record nor the parties’ briefs disclose which judgments McPeak returned. Elson cites only to the district court’s restitution opinion which notes that the court approved McPeak’s agreement with the government pursuant to which McPeak would satisfy his restitution obligation by turning over to the government “[c]ertain judgments against Schultz which the [g]overnment estimates to be worth between $6 [million] and $10 [million].” (J.A. 150 n.4.) Significantly, Elson does not argue that the judgments McPeak delivered to the government include the judgments previously held by the victims at issue here—Bourke and St. Paul. As with the attorney-fee claim, if St. Paul and Bourke have received compensation for their losses, the district court should offset the restitution obligation by the amount received, assuming that the compensation is for the same loss that is the subject of the restitution obligation. E.g., United States v. Crawford, 169 F.3d 590, 593 (9th Cir. 1999). Here, even though McPeak has returned the judgments, the victims who sold the judgments remain uncompensated for the loss—the difference between the judgment’s value and the amount that they received in exchange for the judgment—caused by the Schultz conspiracy. Under the applicable statutory provisions, a victim must have “received compensation” for a court to consider the offset allowance provided in § 3664(j)(1). Further, Elson has not met his burden of showing that the No. 07-3778 United States v. Elson Page 29 government has collected on the returned judgments and distributed the proceeds to the victims. Accordingly, § 3664(j)(2), which provides that the restitution amount “shall be reduced by any amount later recovered as compensatory damages for the same loss” does not apply. Because “funds the victims have not received cannot reduce or offset the amount of losses the defendant is required to repay,” Bright, 353 F.3d at 1123, the district court lacked authority to reduce Elson’s restitution obligation by the value of the judgments returned. Elson further argues that, because McPeak’s restitution obligation was deemed satisfied by McPeak’s return of certain judgments, his obligation also should be discharged “since Elson and McPeak functioned together in the conspiracy.” (Def.’s Br. 11.) However, McPeak entered into a specific agreement with the government regarding restitution prior to the district court’s entry of the restitution order. Thus, as the district court noted in its restitution order, “the findings in th[e] order [relating to Elson’s restitution] do not pertain to [McPeak],” and McPeak was not ordered to pay restitution jointly and severally with Elson and the other co-defendants. (J.A. 150 n.6.) Moreover, Elson has not provided any details regarding the agreement between McPeak and the government, nor has he offered any reason to believe that McPeak’s payment of his restitution obligation through the return of judgments should discharge Elson’s obligation to pay restitution to the victims of the conspiracy. Accordingly, we conclude that Elson is not entitled to an offset of his restitution obligation.