Court Opinion

ID: 620008
Source: CourtListenerOpinion
Date Created: 2011-12-29 20:58:16+00
Date Added: 2024-06-11T17:50:50.517878
License: Public Domain

(Not for Publication in West's Federal Reporter)

          United States Court of Appeals
                        For the First Circuit

No. 11-1310

                              UNITED STATES,

                                  Appellee,

                                       v.

                           HAROLD F. CHORNEY,

                         Defendant, Appellant.

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                  FOR THE DISTRICT OF RHODE ISLAND

              [Hon. Mary M. Lisi, U.S. District Judge]

                                    Before

                  Torruella, Boudin and Thompson,
                          Circuit Judges.

     Harold F. Chorney on brief pro se.
     Leslie J. Kane, Assistant U.S. Attorney, and Peter F. Neronha,
United States Attorney, on brief for appellee.

                            December 29, 2011
     Per Curiam.       Defendant Harold Chorney, having been ordered in

1994 to pay $569,469 in restitution as part of a criminal sentence,

appeals from a recent district court order requiring him to make

installment payments of $500 per month. His principal arguments on

appeal    are   that     (1)   the   installment-payment            provision      is

inapplicable and (2) his only two sources of income--a monthly

social security benefit and a monthly veterans disability benefit--

cannot be considered in determining his financial ability to make

such payments.

     Each of these arguments raises some knotty questions, as we

will briefly explain. Each of them is also procedurally defaulted,

not having been raised in timely fashion in district court.                     As a

result,   neither   the    magistrate      judge      nor    the   district   judge

addressed them below; more surprisingly, the government has not

addressed   them on      appeal.     Nor    has      the    government   mentioned

defendant's procedural default--an omission which would allow us to

deem that defense forfeited and proceed to the merits.                   See, e.g.,

Sotirion v. United States, 617 F.3d 27, 32 (1st Cir. 2010).                     But

such a course is not obligatory, see, e.g., Pike v. Guarino, 492

F.3d 61, 74 (1st Cir. 2007), and we are reluctant to undertake a

resolution of these issues on the merits absent meaningful input

from the parties and the district court.

     As   it    happens,    defendant      is   in    a     position   to   seek    a

modification of the installment order, as permitted by 28 U.S.C. §

                                     -2-
3204(b), due to a change in his financial circumstances (stemming

from his recent move out of his girlfriend's home).              Under the

circumstances,    we think   the   prudent   course   is   to   affirm    the

district court judgment on the basis of lack of plain error, but

without prejudice to defendant pursuing these same two arguments at

any such reopened proceeding.       The government would there be free

to raise any available argument in rebuttal, except of course for

a res judicata defense based on events in the instant appeal.

     We   here   will   simply   highlight   the   key issues    raised    by

defendant's first two contentions, without intimating any view as

to the proper disposition thereof.            We will also affirm the

dismissal of a third contention with prejudice for lack of merit.

     1. Defendant contends that the installment-payment provision,

set forth in 28 U.S.C. § 3204, is inapplicable by its very terms.

Enacted in 1990 as part of the Federal Debt Collection Procedure

Act (FDCPA), § 3204 authorizes an installment order only

     if it is shown that the judgment debtor–
          (1) is receiving or will receive substantial
     nonexempt disposable earnings from self employment that
     are not subject to garnishment; or
          (2) is diverting or concealing substantial earnings
     from any source, or property received in lieu of
     earnings.

28 U.S.C. § 3204(a).     See, e.g., S.P. Davis, Sr. v. United States,

2011 WL 4712077, at *2 (W.D. La. 2011) (stating that government

"must make a showing" that one of these conditions is present).

Defendant insists that neither condition has been satisfied; there

                                    -3-
has been no showing, he contends, that his social security or

veterans benefits are derived "from self employment," or that he is

"diverting or concealing" any earnings.               On the basis of the

present record, it is difficult to come to a different conclusion.

     But   defendant     did   not   raise     this   issue    until   seeking

reconsideration of the district judge's decision.                He has thus

failed to preserve the matter for appeal.             See, e.g., Dillon v.

Select Portfolio Servicing, 630 F.3d 75, 80 (1st Cir. 2011).

Ordinarily, we would proceed to review for plain error, inquiring

whether there was (1) an error that (2) was plain and that (3)

affected   substantial     rights    and     (4)   seriously    affected   the

fairness, integrity or public reputation of judicial proceedings.

See, e.g., United States v. Olano, 507 U.S. 725, 732 (1993).               But

no such extended analysis is necessary here.            Even if plain error

were present, we would refrain as a matter of discretion from

correcting it, given defendant's ability to pursue the matter in a

reopened proceeding under 28 U.S.C. § 3204(b).            See, e.g., United

States v. Gilberg, 75 F.3d 15, 22 (1st Cir. 1996) ("Olano entrusts

remediation of plain error to the sound discretion of the reviewing

court").

     Defendant also contends that § 3204(a) is inapplicable for a

separate reason.   He notes that, prior to 1996, the FDCPA could

only be used to collect restitution and other debts owed to the

government, not to private entities.          See, e.g., United States v.

                                     -4-
Bongiorno, 106 F.3d 1027, on rehearing, 110 F.3d 132 (1st Cir.

1997).    The 1994 restitution order here directs payment to be made

to the Department of Justice "for the benefit" of the FDIC.

Defendant asserts that, back in 1999 in a related bankruptcy

proceeding, the FDIC assigned all of its interest to a private

entity.   Yet even if so, he fails to explain why a creditor's claim

in a bankruptcy proceeding is the same thing as a designated

payee's    interest   in   restitution.    In   any   event,   defendant

acknowledges that he failed to make this argument below, and plain

error is lacking.     But he remains free to pursue the matter further

at a reopened proceeding.

     2.    Section 3204 also provides that no installment order may

be issued "with respect to any earnings of the debtor except

nonexempt    disposable    earnings."     28    U.S.C.   §   3204(c)(2).1

Defendant contends that his social security and veterans benefits

are "exempt"--not only under § 3204(c)(2) for purposes of an

installment order, but also more generally for purposes of any

restitution order. This argument has mostly surfaced for the first

time on appeal.

     One might consider this exemption issue from any of three

separate angles.      First, one might turn to 28 U.S.C. § 3014(a),

     1
       The term "disposable earnings" is defined as "that part of
earnings remaining after all deductions required by law have been
withheld," 28 U.S.C. § 3002(5), while the term "nonexempt
disposable earnings" means "25 percent of disposable earnings,"
subject to a statutory limit on garnishment, id. § 3002(9).

                                   -5-
which is entitled "exempt property"--a provision mentioned by

neither party. It states that in a "proceeding under this chapter"

(e.g., a § 3204 motion for installment payments), a debtor may

elect to "exempt property ... that is specified in § 522(d) of

title 11, as amended from time to time."    28 U.S.C. § 3014(a)(1).

Section 522(d), in turn, refers inter alia to a "debtor's right to

receive ... a social security benefit ..., a veterans' benefit,

[or] a disability ... benefit."      11 U.S.C. § 522(d)(10)(A)-(C).

Pointing to the "right to receive" language, some courts have held

that this provision exempts "future" benefits but not "payments

which have already been received."    In re Carpenter, 614 F.3d 930,

935 (8th Cir. 2010).   If so, query whether § 3014(a) prohibits a

court from considering such benefits when estimating a defendant's

ability to make installment payments under § 3204.

     Second, one might rely on the anti-alienation provisions

contained within the Social Security Act (SSA) and the Veterans'

Benefits Act (VBA)--as defendant has done, albeit only on appeal.

The SSA provision states in pertinent part that "none of the moneys

paid or payable ... under this subchapter shall be subject to

execution, levy, attachment, garnishment, or other legal process."

42 U.S.C. § 407(a).     The VBA provision is equally emphatic:

"Payments of benefits ... made to ... a beneficiary ... shall be

exempt from the claim of creditors, and shall not be liable to

attachment, levy, or seizure by or under any legal or equitable

                               -6-
process    whatever,     either   before       or    after       receipt   by     the

beneficiary."     38 U.S.C. § 5301(a).

       These provisions apply to benefits even "after they have been

distributed to beneficiaries."          Hoult v. Hoult, 373 F.3d 47, 56

(1st Cir. 2004) (§ 407(a)); accord Porter v. Aetna Cas. & Surety

Co., 370 U.S. 159 (1962) (§ 5301(a), then codified as § 3101(a)).

Accordingly, seizure of social security or veterans benefits to pay

a court-ordered fine or restitution would appear improper.                      See,

e.g., Bennett     v.    Arkansas, 485        U.S.   395    (1988)   (per   curiam)

(invalidating scheme attaching inmates' social security benefits to

help defray costs of maintaining prison).

       The closer question is whether such benefits can be taken into

account simply to determine an individual's ability to pay a fine

or restitution.        See United States v. Merric, 166 F.3d 406, 412

(1st Cir. 1999) (raising matter sua sponte in ¶ 407(a) context for

possible consideration on remand, and noting that "[t]he point is

an obscure one, raised more by case law than statutory language").

Relevant case law does not appear to yield a clearcut answer.

Compare, e.g., United States v. Lampien, 2001 WL 32753, at *4 n.3

(7th Cir. 2001) (applying United States v. Eggen, 984 F.2d 848 (7th

Cir.    1993)),   and    Gleave   v.    Graham,      954    F.    Supp.    599,    on

reconsideration, 4 F. Supp. 2d 163 (W.D.N.Y. 1997), aff'd, 1998 WL

352947 (2d Cir. 1998), with, e.g., United States v. Smith, 47 F.3d

681, 684 (4th Cir. 1995).

                                       -7-
     Third, one might invoke the restitution procedures set forth

in the Mandatory Victims Restitution Act of 1996 (MVRA), as both

parties have done here. Among other features, the MVRA makes civil

remedies for satisfaction of an unpaid fine available for the

enforcement of an order of restitution.     See 18 U.S.C. §§ 3613(f),

3664(m)(1)(A).   The key enforcement provision is set forth in §

3613(a):

          The United States may enforce a judgment imposing a
     fine in accordance with the practices and procedures for
     the enforcement of a civil judgment under Federal law or
     State law.     Notwithstanding any other Federal law
     (including section 207 of the Social Security Act [42
     U.S.C. § 407]), a judgment imposing a fine may be
     enforced against all property or rights to property of
     the person fined ....

Id. § 3613(a).   Three exceptions to this rule are enumerated, two

of which are relevant here:

          (1) property exempt from levy for taxes pursuant to
     section 6334(a)(1), (2), (3), (4), (5), (6), (7), (8),
     (10), and (12) of the Internal Revenue Code of 1986 shall
     be exempt from enforcement of the judgment under Federal
     law;
          (2) section 3014 ... of title 28 shall not apply to
     enforcement under Federal law ....

Id. § 3613(a)(1), (2).

     If § 3613(a) applies here, any "exemption" argument relying on

28 U.S.C. § 3014 would be defunct, as would any such argument

invoking the SSA's anti-alienation provision, 42 U.S.C. § 407.

Moreover,   defendant's   reliance   on   the   VBA's   anti-alienation

provision, 38 U.S.C. § 5301(a), might also be misplaced. Among the

provisions excepted in subsection (a)(1) is IRC § 6334(a)(10).

                                 -8-
Entitled "[c]ertain service-connected disability payments," this

provision refers to "[a]ny amount payable to an individual as a

service-connected ... disability benefit" under various provisions

of title 38.       If the protection afforded by § 6334(a)(10) were

narrower    than   that    afforded   by    §   5301(a),   the   former   would

apparently control since it, not § 5301(a), is cited in the §

3613(a) exception. Several courts have held that veterans benefits

are no longer "payable" under § 3664(a)(10) once they have been

received.    See, e.g., Calhoun v. United States, 1995 WL 411832, at

*1 (Fed. Cir. 1995) (per curiam).               If so, query whether such

benefits can be considered under the MVRA in determining the amount

of monthly restitution one can afford to pay.

     Another question is whether the MVRA even applies here.               Both

sides have assumed that it is applicable.              But the MVRA by its

terms applies only to defendants "convicted on or after the date of

enactment"--April 24, 1996.           Pub. L. No. 104-132, § 211.          This

court has regularly applied pre-MVRA law in cases where, as here,

the conviction occurred prior to that date.                See, e.g., United

States v. Witham, 648 F.3d 40, 46 n.9 (1st Cir. 2011) (citing

cases).     But cf. United States v. Dover, 2011 WL 1466473, at *4

(E.D. Tenn. 2011).        Whether a particular MVRA provision is deemed

substantive or procedural might possibly have some relevance in

this regard.       And ex post facto concerns could come into play.

See, e.g., United States v. Nichols, 169 F.3d 1255, 1279 (10th Cir.

                                      -9-
1999) (listing cases).

       To varying degrees, defendant has adverted to portions of

these "exemption" arguments below and on appeal, but probably not

in enough of a sustained fashion to avoid procedural default.

Under the circumstances, we will again affirm due to the lack of

plain error, but without prejudice to defendant pursuing these

arguments at any reopened proceeding.

       3. Finally, defendant seeks to challenge the 1994 restitution

order directing payment of $569,469 to the FDIC.               He claims not to

have received credit for numerous assets that allegedly had been

sold   at   auction,   nor   for     others    said   to   have   gone   missing.

Defendant is apparently asking that his filings here be construed

in part as a habeas petition under 28 U.S.C. § 2255, one seeking an

amended judgment with a corresponding reduction in the amount of

restitution.     This request can be rejected for the simple reason

that a § 2255 petition is unavailable for this purpose.                   By its

terms, § 2255 applies only to petitioners "in custody" who "claim[]

the right to be released"; it does not provide relief to those

"merely     claiming   the   right    to   a   reduced     restitution    order."

Smullen v. United States, 94 F.3d 20, 25 (1st Cir. 1996).                    The

district court's dismissal of this argument will thus be affirmed

with prejudice.

       The judgment is affirmed, but without prejudice to defendant

pursuing his first two arguments--involving the applicability of 28

                                       -10-
U.S.C. § 3204 and the "exempt" status of his social security and

veterans benefits--at any reopened proceeding seeking modification

of the restitution order.

                              -11-