Opinion ID: 787077
Heading Depth: 2
Heading Rank: 2

Heading: Retroactive Application of the 2001 Amendment to the Sentencing Guidelines

Text: 34 Because Amendment 617 to the Sentencing Guidelines, U.S.S.G. Manual supp. app. C (2001), substantially increased the penalties for fraud and other financial crimes, the district court sentenced Defendants under the version of the Sentencing Guidelines in effect at the time the offense was committed, rather than the version in effect on the date of sentencing. See U.S.S.G. § 1B1.11(b)(1) (If the court determines that use of the Guidelines Manual in effect on the date that the defendant is sentenced would violate the ex post facto clause of the United States Constitution, the court shall use the Guidelines Manual in effect on the date that the offense of conviction was committed.); United States v. Johns, 5 F.3d 1267, 1269 (9th Cir.1993) (so holding). Using the 1995 version of U.S.S.G. § 2F1.1, the court determined that the total amount of loss attributable to Defendants' conduct was $533,529.83, leading to a 10-level increase to the adjusted offense level. U.S.S.G. § 2F1.1(b)(1)(K) (1995). Both Defendants objected to the inclusion of $41,143.63 in interest and finance charges in the total amount of loss to victims. Exclusion of interest and finance charges would bring the amount of loss below $500,000, leading to a one-level reduction in Defendants' total offense level. U.S.S.G. § 2F1.1(b)(1)(J) (1995). 35 It is unclear whether, in 1995, the Guidelines intended for contractual interest and finance charges to be included in the total amount of loss. The Guidelines defined loss as the value of the money, property, or services unlawfully taken; it does not, for example, include interest the victim could have earned on such funds had the offense not occurred.  U.S.S.G. § 2F1.1, cmt. n. 7 (1995) (emphasis added). When applying that provision, some circuits distinguished between contractual interest and opportunity cost interest (that is, interest the lender could have earned if it had invested the borrowed amount elsewhere). Those circuits concluded that the former, but not the latter, could be included in the loss calculation. United States v. Goodchild, 25 F.3d 55, 65 (1st Cir.1994); United States v. Lowder, 5 F.3d 467, 471 (10th Cir.1993). Other circuits rejected the distinction between contractual interest and opportunity cost interest and concluded that all interest owed on loans was excluded from the Guidelines' definition of loss. United States v. Hoyle, 33 F.3d 415, 419 (4th Cir.1994); United States v. Guthrie, 144 F.3d 1006, 1011 (6th Cir.1998). Both interpretations were reasonable, and the ambiguity of application note 7 was acknowledged. Goodchild, 25 F.3d at 65-66. 36 The Ninth Circuit has not yet confronted the issue. In United States v. Davoudi, 172 F.3d 1130, 1136 (9th Cir.1999), we stated in dictum that a district court may choose to include unpaid interest still due on the loan in the calculation of the victim's actual loss. However, our actual holding in that case was limited to concluding that a district court is not required to deduct interest payments from the total amount of loss. Id. at 1135-36. Thus, Davoudi left open the larger issue of the treatment of contractual interest generally under § 2F1.1. 37 In 2001, the Sentencing Commission resolved the circuit split in an amendment to the Sentencing Guidelines that added application note 2(D) to § 2B1.1. Application note 2(D)(i) (since renumbered 3(D)(i)) states that [l]oss shall not include... [i]nterest of any kind, finance charges, late fees, penalties, amounts based on an agreed-upon return or rate of return, or other similar costs. Defendants point to that application note as conclusive proof that the district court's sentencing decision is erroneous. However, we may consider the 2001 amendment when interpreting the 1995 version of the Sentencing Guidelines only if that amendment is a clarification of existing law rather than a substantive change in the law. See United States v. Sanders, 67 F.3d 855, 856 (9th Cir.1995) (The Ninth Circuit has consistently stated that when an amendment is a clarification, rather than an alteration, of existing law, then it should be used in interpreting the provision in question retroactively.); see also U.S.S.G. § 1B1.11(b)(2) (providing that if a court applies an earlier edition of the Guidelines Manual, the court shall consider subsequent amendments, to the extent that such amendments are clarifying rather than substantive changes). The parties, therefore, focus their dispute on the issue whether the 2001 amendment is a clarifying or a substantive amendment. 38 As our cases in this area demonstrate, [i]t may not always be easy to determine whether an amendment clarifies or changes a guideline. Johns, 5 F.3d at 1269; see also United States v. Spinello, 265 F.3d 150, 160 (3d Cir.2001) (acknowledging that there is no bright-line test for distinguishing between clarifying and substantive amendments). Among the factors that guide our inquiry, three figure most prominently: (1) whether the amendment is included on the list of retroactive amendments found in U.S.S.G. § 1B1.10(c); (2) whether the Commission itself characterized the amendment as a clarification; and (3) whether the amendment resolves a circuit conflict. See United States v. Aquino, 242 F.3d 859, 865 (9th Cir.2001). 39
40 The addition of application note 2(D) was one of several changes bundled in Amendment 617, the Commission's Economic Crime Package: 41 The major parts of the amendment are: (1) consolidation of the theft, property destruction, and fraud guidelines; (2) a revised, common loss table for the consolidated guideline, and a similar table for tax offenses; (3) a revised, common definition of loss for the consolidated guideline; (4) revisions to guidelines that refer to the loss table in the consolidated guideline; (5) technical and conforming amendments; and (6) amendments regarding tax loss. 42 U.S.S.G. Manual supp. app. C at 180 (2001). 43 Amendment 617 is quite extensive. Spanning some 57 pages of the Supplement to the 2001 Guidelines Manual, the amendment makes several major and minor changes to the Guidelines' provisions addressing theft and financial crimes. Thus, it is not surprising that Amendment 617 does not appear on § 1B1.10(c)'s list of retroactive amendments. We agree with the government that the Commission clearly did not intend Amendment 617 to be applied retroactively in its entirety. However, that acknowledgment begins, rather than ends, our inquiry. The omission of Amendment 617 from the retroactivity list tells us nothing about the Commission's intent with respect to any particular provision in that mammoth amendment. 44 Analyzing the issue with varying degrees of detail, cases have found some provisions in Amendment 617 to be substantive changes in the law and some to be clarifications of existing law. Compare United States v. Hartz, 296 F.3d 595, 599 (7th Cir.2002) (holding that the revision of the enhancement for `affect[ing]' a financial institution is an alteration of existing law because the amendment substantively changes an unambiguous provision and because the Sentencing Commission did not characterize the amendment as a clarification), with United States v. Saunders, 318 F.3d 1257, 1263-64 & n. 8 (11th Cir.2003) (concluding that the amendment's revision of the commentary relating to the meaning of person in the business of receiving and selling stolen property was a clarifying amendment (internal quotation marks omitted)). Because Amendment 617 both substantively alters and clarifies existing law, in different particulars, its exclusion from § 1B1.10(c)'s retroactivity list is not instructive. 45
46 Application note 2(D) is part of Amendment 617's revised definition of loss under the Guidelines. Like Amendment 617 itself, the revised loss definition may not be characterized as entirely substantive or entirely clarifying. The multi-purpose revised definition  makes clarifying and substantive revisions to the definitions of loss previously in the commentary to §§ 2B1.1 and 2F1.1, resolves a number of circuit conflicts, addresses a variety of application issues, and promotes consistency in application. U.S.S.G. Manual supp. app. C at 185 (emphasis added). 6 That the Commission refers to the revised loss definition as making both substantive and clarifying changes complicates our inquiry into its characterization of the particular provision at issue here. 47 The government places great emphasis on the fact that the word clarify does not appear in the paragraph explaining the exclusion of interest and finance charges from the loss definition. In pertinent part, that paragraph provides: 48 The amendment reflects a decision by the Commission that interest and similar costs shall be excluded from loss.... Thus, the rule resolves the circuit split regarding whether bargained for interest may be included in loss. [Comparing cases.] This rule is consistent with the general purpose of the loss determination to serve as a rough measurement of the seriousness of the offense and culpability of the offender and avoids unnecessary litigation regarding the amount of interest to be included. 49 Id. at 187-88. 50 For two reasons, we place little significance on the absence of the word clarify in that paragraph. First, our cases suggest that the Commission's characterization, while instructive, is not determinative. In United States v. Washington, 66 F.3d 1101, 1103-04 (9th Cir.1995), we held that an amendment to the Sentencing Guidelines was substantive despite the Commission's statement that the amendment was intended to clarify an existing provision. If we can reject the Commission's label altogether, then a fortiori we can supply one where it has not chosen either label. 51 Second, as the preceding logic suggests, we have held in a number of cases that an amendment clarifies an earlier guideline when the Commission simply failed to make explicit that an amendment was a clarification. See, e.g., United States v. Flores, 93 F.3d 587, 592 (9th Cir.1996); United States v. Felix, 87 F.3d 1057, 1060 (9th Cir.1996); United States v. Helmy, 951 F.2d 988, 995 (9th Cir.1992). Thus, our oft-repeated statement that an amendment to the Sentencing Guidelines will not be given retroactive effect unless it plainly serve[s] to clarify pre-existing law, rather than to alter it, United States v. Bishop, 1 F.3d 910, 912 (9th Cir.1993), should not be read to mean that an amendment will not be given retroactive effect unless the amendment plainly states that it clarifies pre-existing law. 52 Because the Commission characterized the revised definition of loss as both a substantive and a clarifying amendment, and in the absence of an affirmative characterization of the change as substantive, we are reluctant to place dispositive weight on the absence of the word clarify in the paragraph explaining the exclusion of interest. The Fourth Circuit has decided that a similarly worded provision of Amendment 617's revised definition of loss applies retroactively without the benefit of an explicit statement by the Commission that the amendment is a clarification. United States v. Miller, 316 F.3d 495, 502 (4th Cir.2003). Thus, rather than resolving the issue, the Commission's silence on whether application note 2(D) is a clarifying or substantive amendment requires us to look to the circumstances surrounding the relevant guideline and its amendment. United States v. Martinez, 946 F.2d 100, 102 (9th Cir.1991). 53 Similarly, the use of the term decision — to which the government attaches great significance — is of little help. In context, the decision that the Commission made was to resolve the extant circuit split on the question whether contractual interest should be included in the loss calculation. We turn next to the significance of the Commission's choice in that regard.
54 Chief among the circumstances we examine when deciding whether to apply an amendment retroactively is the role of the amendment in harmonizing previously conflicting circuit precedent. An amendment that resolves a circuit split generally clarifies and does not modify existing law. Sanders, 67 F.3d at 857. Other circuits, similarly, emphasize the resolution of conflicting interpretations of ambiguous provisions in the Sentencing Guidelines when deciding whether to apply an amendment retroactively. See Hartz, 296 F.3d at 599 (listing, among factors to consider, whether the amendment resolves an ambiguity in the original wording of the guideline). 55 As noted above, the interest-exclusion amendment resolved a conflict between two equally reasonable interpretations of the Sentencing Guidelines' definition of loss. As the First Circuit explained in Goodchild: 56 This is a close issue and we must acknowledge that there is to some degree a conflict between the cited cases and the language of the Commentary. The conflict is due to a clash between the ambiguous language used in the Commentary and the complexity of what constitutes interest and when it is an integral part of the value of the money, property or services unlawfully taken. Our holding will not solve the problem; such resolution lies with the Sentencing Commission. 57 25 F.3d at 65-66 (citation omitted). Because the challenged amendment is the result of the Commission's efforts to resolve a circuit conflict, and a reasoned and reasonable conflict at that, this factor weighs heavily in favor of concluding that the amendment is a clarification. 58 Although acknowledging that the amendment was intended to resolve a circuit split, the government contends that the amendment nonetheless is a substantive change in the law because the amendment changed the law of this circuit. In Johns, 5 F.3d at 1270, we concluded that an amendment to the Guidelines was a substantive change in the law, in part because the amendment overruled circuit precedent and retroactive application might violate the ex post facto clause. However, we later held that, when the ex post facto clause is not implicated, an amendment may be considered clarifying notwithstanding the fact that the amendment changes the law of this circuit. Sanders, 67 F.3d at 857. Sanders ' holding is a sound one. If all amendments that overruled a circuit's own precedent were deemed substantive, an amendment would be a clarification, and therefore retroactive, only in those circuits whose prior case law already was consistent with the amendment. Any benefit of retroactive application would be entirely illusory, and the Commission's resolution of the circuit split would create uniformity more slowly. 59 Amendment 617 made several substantive and clarifying changes to the Sentencing Guidelines' definition of loss for financial crimes. In amending the Guidelines' commentary to make explicit that the exclusion of interest applies to both contractual and opportunity cost interest, the Commission intended to resolve a circuit conflict between two equally reasonable interpretations of the loss definition in the earlier version of the Guidelines. In view of that intention, and the ambiguity of the earlier definition, we hold that the amendment was a clarification of existing law. Reading § 2F1.1 in the light of application note 2(D), we conclude that the district court erred by including interest and finance charges in the amount of loss under § 2F1.1.