Court Opinion

ID: 4198932
Source: CourtListenerOpinion
Date Created: 2017-08-26 02:01:43.669177+00
Date Added: 2024-06-11T07:46:50.866553
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                       AUG 25 2017
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,                       No.    15-50305
                                                       16-50020
                Plaintiff-Appellee,
                                                D.C. No.
 v.                                             2:12-cr-00631-ODW-1

KELLY GEARHART,
                                                MEMORANDUM*
                Defendant-Appellant.

                   Appeal from the United States District Court
                      for the Central District of California
                   Otis D. Wright II, District Judge, Presiding

                      Argued and Submitted August 8, 2017
                              Pasadena, California

Before: CALLAHAN and OWENS, Circuit Judges, and FABER,** District Judge.

      Defendant Kelly Gearhart appeals from the district court’s imposition of a

168-month sentence and a restitution award for his guilty plea convictions for mail

fraud, wire fraud, and money laundering. As the parties are familiar with the facts,

we do not recount them here. We have jurisdiction pursuant to 18 U.S.C.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable David A. Faber, United States District Judge for the
Southern District of West Virginia, sitting by designation.
§ 3742(a) and 28 U.S.C. § 1291. We vacate the sentence and remand for

resentencing.

      1. As the government concedes, it was plain error for the district court to

impose a 168-month sentence concurrently on counts 13, 14, and 15 because the

maximum sentence for a violation of 18 U.S.C. § 1957 (count 15) is 120 months.

18 U.S.C. § 1957(b)(1). Accordingly, we vacate the 168-month sentence and

remand for the district court to resentence on count 15 within the statutorily

allowable range.

      2. In addition, Gearhart asserts that the district court failed to rule on

numerous factual disputes which affected the ultimate Guidelines calculation.

Federal Rule of Criminal Procedure 32(i)(3)(B) requires that a court “must—for

any disputed portion of the presentence report or other controverted matter—rule

on the dispute or determine that a ruling is unnecessary either because the matter

will not affect sentencing, or because the court will not consider the matter in

sentencing[.]” We have interpreted this requirement to mean that “all Rule 32

findings must be express or explicit.” United States v. Doe, 705 F.3d 1134, 1155

(9th Cir. 2013) (internal quotations and citation omitted). But we have also

clarified that “[t]he purpose and context of [Rule 32] demonstrate that the district

court need only address unresolved objections to the presentence report that relate

to matters in controversy.” United States v. Petri, 731 F.3d 833, 838 (9th Cir.

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2013).

      A finding that Heritage Oaks Bank and San Luis Trust Bank were aware of

the partial reconveyances of lots Gearhart had promised to other investors would

impact whether these banks were actual victims of Gearhart’s fraud. If Heritage

Oaks Bank and San Luis Trust Bank were not victims, Gearhart’s Guidelines

calculation would change with respect to the total loss amount as well as the

enhancement for gross receipt of more than $1 million from financial institutions.

Thus, the district court was required to make a specific factual finding as to this

matter.

      Resolving the exact amounts that each individual investor loaned Gearhart

may not materially change the sentencing determination because even if these

disputes were resolved in favor of Gearhart, the amount of losses would still result

in a Guidelines loss figure in excess of the $7,000,000 threshold. But the scope of

the joint undertaking between Gearhart and Miller is directly relevant to whether

all of the Hurst investors should be considered victims. Accordingly, we remand

for the district court to make a specific factual finding as to the scope of the joint

undertaking.

      3. The government submitted victim impact letters on behalf of 38

individuals to inform sentencing. It then recommended a procedure for the court to

address the letters. Only two of the 38 letters were determined to be from victims

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for the purposes of sentencing. Nevertheless, during the July 2, 2015, sentencing

hearing, the district court stated, “I strongly believe that there are hundreds of

victims, and that feeling comes from all of these letters that were written where

many times each of these individual victims discuss the investors’ meetings where

over a thousand people are present.” It also stated, “I was greatly touched by the

numerous letters that I’d read from some of the elderly investors[.]”

      Thus, it appears that the district court did take all of the victim letters into

account when determining Gearhart’s sentence even though most of those

individuals were not found by clear and convincing evidence to be victims of

Gearhart’s offense. Although “[n]o limitation shall be placed on the information

concerning the background, character, and conduct of a person convicted of an

offense which a court of the United States may receive and consider for the

purpose of imposing an appropriate sentence[,]” 18 U.S.C. § 3661, information

from individuals not determined to be victims does not concern the background,

character, and conduct of the defendant. Accordingly, the district court erred by

considering the victim impact letters of individuals not determined to be victims of

Gearhart’s offense.1

      4. Additionally, the district court’s unwillingness to spend time calculating

1
 Because we find reversible procedural error, we do not reach the sentence’s
substantive reasonableness. See, e.g., United States v. Cantrell, 433 F.3d 1269,
1280 (9th Cir. 2006).

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restitution awards was a violation of the requirement to determine proximate

causation. 18 U.S.C. § 3663A(a)(2) states that a “victim” for restitution purposes

“means a person directly and proximately harmed as a result of the commission of

an offense for which restitution may be ordered[.]” Here, the district court did not

conduct an inquiry into whether all of the Hurst investors were proximately

harmed by Gearhart, and instead required the parties to agree upon a blanket

percentage offset. Thus, we remand for the district court to determine whether

each victim suffered losses proximately caused by Gearhart, what those losses

were, and to award restitution accordingly. Cf. United States v. Hunter, 618 F.3d
1062, 1064 (9th Cir. 2010) (affirming the district court’s restitution award because

it had a “clear legal and factual basis for ordering restitution . . . for the amount of

loss sustained by each victim directly and proximately harmed as a result of th[e]

offense”).

      5. Finally, we deny Gearhart’s request for reassignment, as this case does

not present the “rare and extraordinary circumstances” needed to justify relief.

Krechman v. County of Riverside, 723 F.3d 1104, 1112 (9th Cir. 2013) (citation

omitted).

   VACATED AND REMANDED.

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