Court Opinion

ID: 4614308
Source: CourtListenerOpinion
Date Created: 2020-11-20 23:02:13.394335+00
Date Added: 2024-06-11T07:54:45.643160
License: Public Domain

United States Court of Appeals
                        For the First Circuit

No. 19-1929

                  IN RE: AKEBIA THERAPEUTICS, INC.,

                             Petitioner.

                    PETITION FOR WRIT OF MANDAMUS
                 TO THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF MASSACHUSETTS

              [Hon. Indira Talwani, U.S. District Judge]

                               Before

                          Thompson, Barron,
                           Circuit Judges.*

     Michael L. Fitzgerald, with whom R. Daniel O'Connor, Patrick
Welsh, Scott Grannemann, and Ropes & Gray LLP were on brief, for
petitioner.

                          November 20, 2020

     * Judge Torruella heard oral argument in this matter and
participated in the semble, but he did not participate in the
issuance of the panel's opinion in this case. The remaining two
panelists therefore issued the opinion pursuant to 28 U.S.C.
§ 46(d).
             THOMPSON, Circuit Judge.          This petition for a writ of

mandamus asks us to consider whether the district court properly

determined an award of restitution to a corporate victim of a

securities fraud conspiracy.          The United States government, on

behalf of Akebia Therapeutics, Inc., a biopharmaceutical company,

sought reimbursement of $312,899.22 pursuant to the Mandatory

Victims Restitution Act (MVRA).           The requested reimbursement was

for fees Akebia paid to attorneys it hired for assistance and

advice while Akebia responded to requests for information during

the   government's     investigation      of    suspected    insider     trading

activities     and    provided     evidence      during     the     government's

prosecution in United States v. Chan, et al., D. Mass. No. 16-cr-

10268.    The district court awarded Akebia approximately half of

the   attorney's     fees   for   which   it    had   sought      reimbursement.

Dissatisfied, Akebia filed a petition for a writ of mandamus in

this court pursuant to the Crime Victims' Rights Act (CVRA), 18

U.S.C. § 3771(d)(3), requesting a vacatur of the district court's

restitution order and a reconsideration of some of the categories

the district court did not allow.

             For the reasons we explain below, we affirm.1

      1Akebia, the government, and the defendants in the underlying
case agreed to waive the usual 72-hour deadline we have under 18
U.S.C. § 3771(d)(3) to decide whether to grant the petition for a
writ of mandamus. This Court acknowledged the waiver in its order
entered on October 3, 2019 and clarified on October 28, 2019. See
United States v. Aguirre-González, 597 F.3d 46, 55 (1st Cir. 2010)

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                                BACKGROUND

           In July 2018, a jury convicted Akebia's former Director

of Biostatistics of conspiracy to commit securities fraud as well

as three separate counts of securities fraud, convictions which we

uphold   today   in   a   separately   released     opinion.2    During   the

sentencing phase of the prosecution, the government included a

request for restitution on Akebia's behalf.                Ropes & Gray LLP

submitted a letter in support of Akebia's request for restitution,

explaining Akebia had spent a lot of money to assist the government

with the investigation and prosecution and made efforts to minimize

its expenses by using its own employees as well as contract

attorney firms for as much of the required document production

requested by the government as possible.               The letter asserted

Akebia's expenses were reasonable, necessary, and foreseeable.

           The   defendants,     Schultz     Chan    and   Songjiang   Wang,

objected to the request and, after a hearing, the district court

issued an initial order, separating the categories of expenses

(acknowledging the precatory rather than mandatory nature of the
72-hour timeframe provided in 18 U.S.C. § 3771(d)(3)). In those
same orders, this Court denied the motion to consolidate this
petition with the appeals from the underlying criminal convictions
in United States v. Chan, et al., Nos. 18-2232, 18-2233, 19-1910,
19-1911, instead promising to coordinate the cases as best as
possible. Our opinion in Chan issued today as well.

     2 The same jury convicted the biostatistician's friend, who
had been the leader of a statistical programming group at a
different biopharmaceutical company, of one conspiracy count and
two counts of securities fraud.

                                   - 3 -
Akebia requested for reimbursement into two buckets:                    Either

reimbursable       or     excluded   as   not   necessary    and   foreseeable

expenses.       The district court deemed the following categories of

expenses reimbursable as a foreseeable result of the defendants'

conduct:

     •   "[C]osts of compiling and producing documents in response to
         government requests for those documents in connection with
         the criminal investigation";
     •   "[C]osts incurred in connection with Akebia employees'
         preparation for interviews by the government prosecutors";
     •   "[C]osts incurred by Akebia as part of the restitution
         proceedings."

The district court also declared a few categories to be outside

the scope of the MVRA and therefore not reimbursable:

     •   Fees and costs for outside counsel and summer associates to
         attend criminal proceedings
     •   Fees related to a Freedom of Information Act request
     •   Fees for a background check for a potential employee
     •   Fees for insurance coverage analysis
     •   Costs for public relations
     •   Advice about state privacy laws
     •   Office supplies
     •   Fees for paralegals, clerks, summer associates, associates,
         partners, and litigation support analysts to read the
         indictment and other filings and prepare reports on same
     •   Bills for taxis for attorneys working late on tasks other
         than document production and preparation of employees for
         interviews with the government.

The district court ordered the government to resubmit Akebia's

request in accordance with the parameters the court had set forth.

               The government resubmitted Akebia's request but objected

to       the   district    court's   declaration    that    Akebia's   outside

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counsel's fees and costs for observing the trial proceedings fell

outside the scope of the MVRA.               Ropes & Gray LLP also again

submitted a letter on Akebia's behalf, explaining the resubmission

of the request for reimbursement included expenses only for the

categories the district court had deemed reimbursable and asking

the district court to reconsider its decision to exclude fees for

outside counsel's attendance at the criminal proceedings.

           On    August     22,   2019,   the   district    court   issued     a

Memorandum and Order, awarding Akebia approximately half of the

restitution     requested    ($170,476.36)      and   doubling   down   on   its

conclusion that the fees for the hours outside counsel spent

watching and reporting on the criminal proceedings were neither

reasonable nor foreseeable under the MVRA.               The district court

closely reviewed Akebia's request for restitution, discussing it

category by category and explaining her reasoning as she went.

She ultimately approved the following:

  •   117.25 hours of non-attorney time to physically compile and
      produce documents requested by the government.
  •   158.5 hours of attorney time - a close call but she concluded
      the government met its burden to show this time was necessary.
  •   Hours for Akebia employees to be prepped for interviews with
      government prosecutors because this time was deemed
      necessary.
  •   Transportation costs for attorneys to get to court to watch
      trial proceedings.
  •   20% of the requested attorney time spent on seeking
      restitution because the full amount requested was deemed
      unreasonable.

                                     - 5 -
  •   Attorney and non-attorney time allowed to be paid at the
      lowest number provided for each individual or position's
      hourly-rate range.

The district court denied the following requests:

  •   Expenses incurred before June 8, 2016 because Akebia had no
      contact with the DOJ before then.
  •   Certain entries for attorney and non-attorney time deemed
      insufficiently explained.
  •   Hours for attorney and non-attorney time preparing witnesses
      for trial because this was the purview of the government
      prosecutors, not private counsel.
  •   Attorney hours claimed to attend and report on the trial
      proceedings because these were neither necessary nor
      foreseeable expenses and were deemed a luxury.
  •   80% of the requested attorney time spent on seeking
      restitution.

Akebia, unhappy with the restitution award amount, hopes we will

decide   the   district   court    erred,   and   "require   defendants   to

reimburse [it] for its necessary expenses."

                                  DISCUSSION

           The MVRA requires defendants convicted of a variety of

offenses (property and fraud included) to "reimburse the victim

for lost income and necessary child care, transportation, and other

expenses incurred during participation in the investigation or

prosecution of the offense or attendance at proceedings related to

the offense." 18 U.S.C. § 3663A(b)(4). The purpose of restitution

is to "make the victim whole" by reimbursing the actual loss the

victim suffered because of a defendant's criminal activity. United

States v. Salas-Fernández, 620 F.3d 45, 48-49 (1st Cir. 2010).            In

calculating the dollar amount to be awarded, the district court

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need not be absolutely precise.              Id. (citing United States v.

Innarelli, 524 F.3d 286, 294 (1st Cir. 2008)).               Furthermore, what

constitutes sufficiently foreseeable expenses for reimbursement

must be decided on a "case by case" basis, "in a fact-specific

probe."    United States v. Newell, 658 F.3d 1, 31 (1st Cir. 2011)

(quoting United States v. Vaknin, 112 F.3d 579, 589-90 (1st Cir.

1997), abrogated on other grounds by United States v. Anonymous

Defendant, 629 F.3d 68 (1st Cir. 2010)); United States v. Cutter,

313 F.3d 1, 7 (1st Cir. 2002).

           When a crime victim is not happy with the district

court's restitution order, "a petition for a writ of mandamus under

the CVRA    is the exclusive mechanism for appellate review of

sentencing orders affecting crime victims' rights."              United States

v. Aguirre-González, 597 F.3d 46, 48 (1st Cir. 2010).               The statute

authorizing the petition directs us to "apply ordinary standards

of appellate review."        18 U.S.C. § 3771(d)(3).          And so, we will

examine the final restitution order for abuse of discretion,

reviewing the relevant factual findings for clear error and any

legal conclusions drawn by the district court de novo.                  United

States v. Chin, 965 F.3d 41, 59 (1st Cir. 2020) (citing United

States v. Soto, 799 F.3d 68, 97 (1st Cir. 2015)).              Ultimately, we

consider    whether    the     district       court   made     "a   reasonable

determination     of       appropriate        restitution      by    resolving

uncertainties   with   a     view   towards    achieving     fairness   to   the

                                     - 7 -
victim," including "whether the restitution award has 'a rational

basis in the record.'"          United States v. González-Calderón, 920

F.3d 83, 85 (1st Cir. 2019) (first quoting United States v. Alphas,

785 F.3d 775, 787 (1st Cir. 2015), then quoting Salas-Fernández,

620 F.3d at 48).

             Akebia says there are two errors in the district court's

restitution order that need to be fixed: (1) the district court

applied the wrong precedent; and (2) the district court abused its

discretion when it disallowed some of the expenses Akebia had

requested.       We'll     begin   our    work     with   a   fresh   look   at   the

applicable law before addressing each purported error.

             A   few   months      before    the     district    court   evaluated

Akebia's request for reimbursement of its expenses for outside

counsel pursuant to the MVRA, the Supreme Court considered whether

money   spent    by    a   corporation      on   a   private    investigation      is

reimbursable as "necessary . . . other expenses" under the MVRA.

United States v. Lagos, 138 S. Ct. 1684, 1687 (2018).                    The Court

held the MVRA "does not cover the costs of a private investigation

that the victim chooses on its own to conduct" because, after a

close examination of the wording in § 3663A(b)(4), it concluded

"investigation" is limited to investigations undertaken by the

government and "proceedings" is limited to criminal proceedings.

Id. at 1688-90.        The Court also emphasized the statute's focus on

necessary expenses "incurred during [the victim's] participation

                                         - 8 -
in the investigation or prosecution of the offense."               Id. at 1690

(emphasis in original).

            The district court read Lagos to require it to now place

a heavy weight on whether the kinds of expenses claimed by the

victims    were   "necessary,"    concluding     the   cases    cited   by   the

government and Akebia predated Lagos and therefore only emphasized

whether the expenses were foreseeable.            The district court also

concluded, as a matter of law, that attorney's fees should not be

categorically included or excluded as a whole; instead, attorney's

fees would be awarded under the MVRA "when, and only when, they

are necessary expenses."

            Akebia cries foul.

            Prior   to   Lagos,   our   court   has    said    that   "expenses

qualifying for restitution are not unlimited, . . . [but] will

pass muster if they would not have been incurred in the absence of

the offense, were not too attenuated in fact or time from the

crime, . . . and were reasonably foreseeable."                United States v.

Janosko, 642 F.3d 40, 42 (1st Cir. 2011) (internal quotation marks

and citations omitted).         According to Akebia, the district court

concluded Lagos abrogated Janosko and erred when it applied Lagos

because the Supreme Court case was clearly focused on the narrow

question    of    whether   §   3663A(b)(4)     applied   to     requests    for

reimbursement for expenses from private investigations and did not

shed any light on the kinds of expenses stemming from a government-

                                    - 9 -
agency-driven investigation and subsequent criminal proceedings

that are properly categorized as "necessary."               Akebia insists the

district court needed to look no further than Janosko to know which

criteria to apply to determine whether the expenses Akebia claimed

were in fact "necessary" and therefore reimbursable under the MVRA.

Instead,   Akebia      claims,    the   district    court    "dispensed   with

Janosko"   and   applied    the    wrong     precedent   when   it   considered

Akebia's request for restitution.

           The district court extensively cited to Lagos when it

determined which expenses Akebia claimed fell within the ambit of

mandatory restitution.       To be sure, this newer case narrowed the

construction     and   application      of   §   3663A(b)(4),   categorically

excluding reimbursement for expenses related to a corporation's

private investigation as well as any expenses incurred before a

government investigation began.            Lagos, 138 S. Ct. at 1690.      But

whether Akebia's expenses were related to a private or government

investigation was not an issue before the district court; there

had been no suggestion Akebia undertook its own investigation into

the defendants' activities.

           We agree with Akebia that the district court relied

heavily on Lagos.      However, Lagos was not entirely inapplicable to

the request for restitution because the Supreme Court sharpened

our focus on an important qualifier within the language of the

statute: only necessary expenses are mandated for reimbursement.

                                    - 10 -
See id. at 1689; § 3663A(b)(4).   The district court clearly picked

up the Court's emphasis on the word "necessary" and properly

considered which of Akebia's claimed expenses were integral to its

participation in the government's investigation and prosecution of

the offenses in the criminal proceedings.3

          We emphasize, however, that the criteria we collected

from our previous cases and explicitly identified in Janosko, i.e.,

expenses that "would not have been incurred in the absence of the

offense, . . . were not too attenuated in fact or time from the

crime, . . . and were reasonably foreseeable," continue to be a

critical part of the evaluation of all requests for reimbursement

under the MVRA.   Janosko, 642 F.3d at 42 (internal citations and

quotation marks omitted).   Lagos does not overrule Janosko, and we

don't read the district court's decision to say as much; it

explicitly chose to rely primarily on Lagos because it was decided

more recently than our discussion in Janosko summarizing the

     3  The Supreme Court, in further justification of its
conclusion that the MVRA does not include reimbursement for
expenses related to private investigations, commented that a line-
by-line determination of which expenses incurred during a private
investigation   were   necessary  would   impose   too  heavy   an
administrative burden on the district courts. Lagos, 138 S. Ct.
at 1689. The Court's point is well-taken, but the district court's
efforts to wade through Akebia's request for restitution
highlights that there is, pardon the word, necessarily, some level
of administrative burden to decide which expenses, properly within
the purview of government-driven investigations and criminal
proceedings, were necessary and therefore reimbursable.

                              - 11 -
criteria we have considered in the past.     Moreover, the district

court did not ignore the criterium of foreseeability emphasized in

Janosko.   Case in point:   The district court ultimately concluded

that, "after Lagos, the question before the court is not merely

whether such expenses were foreseeable, but whether they were

'necessary.'"    We agree, and moving forward, Lagos and Janosko

will both be important to the consideration of requests for

restitution.    In our opinion, the district court did not abuse its

discretion in its application of the relevant precedents.

           Now that we have clarified the state of the applicable

law, we move on to consider Akebia's arguments that the district

court abused its discretion when it excluded certain expenses from

the restitution order.4 Akebia specifically challenges three parts

of the restitution order as improperly excluded pursuant to the

governing precedent. Akebia has not, however, claimed the district

court clearly erred with any of the factual findings made in the

process of considering Akebia's requested reimbursement.

     4 No one disputes that Akebia is in fact a victim under the
MVRA or that Akebia accrued expenses while participating in the
government's investigation and prosecution of the defendants. The
dispute lies in what was a "necessary" expense and therefore
reimbursable to Akebia. In addition, because the defendants did
not challenge attorney's fees as a category of expenses ripe for
reimbursement under the MVRA's "necessary . . . other expenses"
and Akebia has obviously not raised this as a legal issue for our
review, we assume without deciding that attorney's fees are proper
fodder for restitution as part of § 3663A(b)(4)'s "necessary . . .
other expenses."

                               - 12 -
            First, the district court's denial of 80% of the fees

Akebia claimed for the time its outside counsel spent preparing

and supporting Akebia's restitution request after the court had

indicated these expenses would be covered.                  The district court

deemed   the      137   hours    Akebia    claimed    for   time   spent   seeking

restitution unreasonable and excessive and allowed only 20% of

these hours claimed.

            Second, the district court's denial of the fees Akebia

claimed for time spent "making corporate witnesses available for

meetings requested by DOJ."             Here, Akebia brings our attention to

the page in the restitution order where the district court denied

Akebia's    request      for    reimbursement      for   time   spent    preparing

corporate witnesses for trial testimony because the government

prosecutors were responsible for preparing these witnesses for

trial testimony.

            Third,      the     district    court's   categorical       refusal   to

reimburse the attorneys' time accrued for their attendance at the

criminal proceedings.           Akebia asserts that their outside counsel's

attendance at all the proceedings was required to help protect

Akebia's confidential and proprietary information; pointing out

that the district court seemed to acknowledge this notion by

allowing the attorneys' transportation costs to the courthouse.

Akebia     also     asserts      that     the    district   court    created      an

                                        - 13 -
inappropriate per se rule that attorney attendance at criminal

proceedings is not reimbursable pursuant to the MVRA.

               The reality is that determining an award of restitution

is a fact-specific undertaking and will vary case-by-case. Newell,

658    F.3d    at   31.        The   district     court    has     the   discretion   to

determine,       for    each    case,    which     expenses      were    necessary    and

foreseeable, and therefore reimbursable.                      The district court's

task    is     to   reasonably        determine     an    appropriate      amount     for

restitution and to ensure the amount awarded has a rational basis

in the record.            González-Calderón, 920 F.3d at 85.                   We have

previously acknowledged that, to some degree, any line drawn which

has the effect of denying part of a request for reimbursement of

expenses is arbitrary.               See United States v. Amador-Huggins, 799

F.3d 124, 134 (1st Cir. 2015) (stating that simply drawing a line,

even if it seems arbitrary, does not make the denial of some

portion of the expenses "inequitable" or "unsustainable" (citing

United States v. Sánchez-Maldonado, 737 F.3d 826, 828 (1st Cir.

2013))).       Regardless of the heavy weight the district court placed

on    the     Supreme     Court's      guidance    in     Lagos,    it   painstakingly

considered each category of expenses presented to it, as well as

each item within each category, to determine a reasonable award to

Akebia based on its determination of whether each category and

item was necessary and foreseeable.                As we stated above, we see no

improper exercise of its discretion in its application of the

                                          - 14 -
relevant law, and no abuse thereof in its series of decisions,

expressed in the order, or in the resulting award to Akebia.

                              CONCLUSION

          And so, all that is left to say is the petition for a

writ of mandamus is DENIED.

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