Court Opinion

ID: 3179532
Source: CourtListenerOpinion
Date Created: 2016-02-23 17:05:33.598667+00
Date Added: 2024-06-11T12:56:55.697071
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 10, 2015          Decided February 23, 2016

                       No. 13-3073

               UNITED STATES OF AMERICA,
                       APPELLEE

                             v.

                     SHAWN HUGHES,
                       APPELLANT

        Appeal from the United States District Court
                for the District of Columbia
                   (No. 1:09-cr-00240-1)

    Gregory S. Smith, appointed by the court, argued the
cause and filed the briefs for appellant.

     Christopher R. Howland, Assistant U.S. Attorney, argued
the cause for appellee. With him on the brief was Vincent H.
Cohen Jr., Acting U.S. Attorney, and Elizabeth Trosman and
Oliver W. McDaniel, Assistant U.S. Attorneys.

   Before: BROWN and KAVANAUGH, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.

   Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.
                               2

    Concurring opinion filed by Circuit Judge BROWN.

     WILLIAMS, Senior Circuit Judge: Shawn Hughes’s
managers at Blackhawk, Inc., a government contractor for
security guard services, told her to certify that Blackhawk
guards had received training that they had not in fact received,
thereby enabling Blackhawk to charge more for each guard’s
services. Relying primarily on false training records from DB
Training Services, Hughes complied. On October 29, 2009
she pleaded guilty to making false statements to government
authorities, in violation of 18 U.S.C. § 1001(a)(2).

     On December 20, 2011 the district court sentenced
Hughes to 30 days in prison and 24 months of supervised
release. More importantly, the court’s sentencing judgment
made Hughes and her co-defendant Douglas Brown, the
owner of DB Training, jointly and severally liable for
$442,330 in restitution. But, critically, the district court also
expressed a clear intention that the actual restitution amount
should be much smaller, perhaps as little as $0. A federal
court had already entered judgment against Blackhawk, Inc.
for more than $1 million. And the district court said, in
sentencing Hughes, that she would not be on the hook at all if
Blackhawk paid its fine. Even in the absence of such a
payment, Hughes would only have to pay “at a rate of not less
than $50 each month.” Transcript of Sentence at 38-40.
Hughes did not appeal, presumably in the entirely logical
belief that the sentence required her to pay restitution of only
$50 each month—if any.

    Then her ordeal began.

    In early 2013 Hughes found out that the Treasury
Department had seized tax refunds due her amounting to
$10,159. The Department had purported to act under the
Treasury Offset Program (“TOP”), 31 U.S.C. §§ 3716 &
                              3

3720A, which authorizes the government, when it owes a
person payment, to offset the amounts otherwise due with any
“past-due, legally enforceable debt” to the government by
withholding the payments. Because of her disqualification
from work in security services (which reduced her income and
largely explains her entitlement to a tax refund), Hughes was
in precarious economic circumstances even before the tax
seizure, with her home already on the verge of foreclosure.

     On February 22, 2013 Hughes filed a Motion for
Clarification or Modification of Supervised Release in the
sentencing court, asking that the tax refunds be returned and
future seizures stopped. Between April 23 and July 18, 2013,
the court held four hearings on the matter. Simultaneously
with the first hearing, the government filed a “Notice of
Restitution Payments and Accounting,” which indicated that
Hughes had in effect contributed over $11,000 in restitution
payments (including the TOP offset), and that Douglas Brown
had paid $500. The Notice also indicated that not a cent had
been received from Blackhawk, that the government’s default
judgment against it was exempt from bankruptcy discharge,
and that the government “continue[d] to search for assets in
satisfaction of this judgment.” The Notice made no reference,
however, to the assets in the Blackhawk bankruptcy estate, the
status of the government’s claims to those assets, government
proceedings if any against principals or shareholders of
Blackhawk, or any pursuit of Brown, DB Training or their
assets.

     At the first hearing, the court vacated Hughes’s sentence,
stating that it had not anticipated or intended that Hughes be
subject to such a harsh sentence. Transcript of Motion
Hearing, Apr. 23, 2013, at 13. At the second and third
hearings, the court entertained further arguments about the
resentencing. At the fourth hearing, the court reimposed its
original sentence, saying that it had no authority to modify
                               4

Hughes’s sentence. The court did not order the government to
return Hughes’s tax refunds or stop withholding future
government payments otherwise due to Hughes.

     The case poses two issues for us. First, should the district
court have recognized and corrected a clerical error in its
judgment? We hold that the sentence manifested such an
error, which the district court should have corrected. Second,
did the district court correctly refuse to order the return to
Hughes of the funds seized by Treasury? In light of the
necessary corrections in the sentence, we hold that the court’s
refusal to remedy the TOP collection was error, and we
remand for the court to require the government to return
Hughes’s tax refunds and to cease withholding payments.

                             * * *

     Hughes argues, correctly, that the district court should
have applied Rule 36 of the Federal Rules of Criminal
Procedure, under which a “court may at any time correct a
clerical error in a judgment, order, or other part of the record,
or correct an error in the record arising from oversight or
omission.” In interpreting Rule 36, we have said that a court
is bound by what it “plainly intended” and cannot modify a
“sentence on the basis that it was unlawfully imposed.”
United States v. Arrington, 763 F.3d 17, 25 (D.C. Cir. 2014).
Here there are clerical errors correctible under Rule 36
because the judgment did not reflect what was “plainly
intended.” First, the oral record says that “the balance of any
restitution [is] owed at a rate of not less than $50 each
month,” and the written judgment has similar language. (The
oral recitations control over the written ones, United States v.
Lewis, 626 F.2d 940, 953 (D.C. Cir. 1980), but here there are
no meaningful differences between the two.) That statement,
however, must mean that a rate of not less or more than $50
each month was required. Otherwise, given the wide range
                                 5

between $50 and $440,000, the judgment would be virtually
meaningless. (Of course, the court can still adjust its payment
schedule if the defendant’s economic circumstances change.
18 U.S.C. § 3572(d)(3).) The intent to limit the payment to
$50 a month is especially clear in light of the court’s plain
expression of intent that the Blackhawk fine could offset the
entirety of Hughes’s restitution.

     Second, the district court said “that payment of restitution
shall begin after the adjustment is figured where the fine for
[Blackhawk] will be applied,” and later added that Hughes
was to pay “the balance of any restitution owed at a rate of not
less than $50 each month . . . if it turns out that . . . there is an
amount outstanding that [Hughes] owe[s]” after Blackhawk’s
fine is subtracted. Transcript of Sentence at 38-40. Although
the wording may be inartful, the only reasonable meaning that
can be assigned these words is that payment is due only after
such time as Blackhawk’s contribution should be determined.
True, in the oral rendition of the sentence the court said at one
point that the “restitution [is] immediately payable,” but this
boilerplate language is controlled by the specific and repeated
references to payments beginning only after the Blackhawk
payment has been subtracted. Transcript of Sentence, Dec.
20, 2011, at 38. A correction under Rule 36 removes the
confusion, and we remand to the district court to make the
correction.

     We now turn to whether the district court erred in
declining to order the government to return to Hughes the
funds seized under the Tax Offset Program. The government
argues that Hughes is barred by her alleged failure to exhaust
administrative remedies, and that in any event any judicial
remedy would require a separate civil suit (rather than simply
continuing in the current proceedings). As to the alleged
failure to exhaust, the government conspicuously fails to
identify any administrative remedies available to Hughes after
                               6

Treasury began making deductions. Further, even assuming
an available administrative remedy, § 10(c) of the
Administrative Procedure Act, 5 U.S.C. § 704, imposes no
prerequisite of administrative exhaustion unless it is
“expressly required by statute or agency rule.” Darby v.
Cisneros, 509 U.S. 137, 143 (1993). The government points
to no statute or rule expressly imposing any such requirement.

     That leaves the government’s theory that Hughes’s
motion in criminal proceedings was inadequate for securing
an order compelling return of funds seized under TOP or for
halting any further seizures; such relief could come, it says,
only in a new civil suit. Appellee’s Br. 44 n.18. The APA
generally provides a right of review, 5 U.S.C. § 702, and goes
on to specify the form of the proceeding: absent some specific
statutory requirement, which is lacking in this case, “any
applicable form of legal action, including actions for
declaratory judgments or writs of prohibitory or mandatory
injunction or habeas corpus, in a court of competent
jurisdiction,” is an acceptable “form of proceeding for judicial
review,” id. § 703. It is undisputed that the district court is a
“court of competent jurisdiction.”

     The only remaining question then for determining
whether judicial review was appropriate here is whether
Hughes’s Motion for Clarification or Modification of
Supervised Release as part of a criminal post-sentencing
hearing is an “applicable form of legal action.” At least under
these circumstances, where agency action threatens to thwart
the proper execution of the collection of restitution ordered by
a district court criminal sentence, and where the Department
of Justice’s purported readings of the sentence have triggered
the actions of Treasury (the overseer of TOP), see 31 U.S.C.
§ 3720A(a); U.S. Department of Justice, Notice of Intent to
Offset, Jan. 31, 2012, it is hard to see why a motion in the
sentencing court should not be an “applicable form of legal
                               7

action.” Indeed, federal courts already have the authority to
issue mandamus “in aid of their . . . jurisdictions,” 28 U.S.C.
§ 1651(a), an authority that includes power “to issue such
commands under [§ 1651] as may be necessary or appropriate
to effectuate and prevent the frustration of orders [they have]
previously issued,” United States v. New York Telephone
Company, 434 U.S. 159, 172 (1977). The power reaches even
“persons who, though not parties to the original action or
engaged in wrongdoing, are in a position to frustrate the
implementation of a court order or the proper administration
of justice” and “who have not taken any affirmative action to
hinder justice.” Id. at 174.

    The government’s thinly-supported assertion that
“[d]efendants routinely bring civil actions of this nature,”
Appellee’s Br. 44 n.18, is irrelevant, given the absence of any
bar under the APA or elsewhere. The government itself has
used motions in a sentencing court to seek judicial approval of
wrapping a defendant’s restitution obligations into TOP.
United States v. Beulke, 892 F. Supp. 2d 1176, 1178, 1186-88
(D.S.D. 2012).

     This takes us to the merits of Hughes’s objection to the
TOP offset. The statute applies to “a past-due, legally
enforceable debt” from a person to a federal agency. 31
U.S.C. § 3720A(a).         The key question then is whether
Hughes’s restitution obligation qualifies as such (or qualified
at the time of the seizure). Treasury regulations (whose
validity we assume arguendo) say that debt is “[d]elinquent or
[equivalently] past-due . . . [when] a debt has not been paid by
the date specified in the [creditor] agency’s initial written
demand for payment, or applicable agreement or instrument
(including a post-delinquency payment agreement), unless
other payment arrangements satisfactory to the creditor
agency have been made.” 31 C.F.R. § 285.5(b) (2009). As
Hughes is obliged under the corrected sentence to start paying
                             8

money only when the Blackhawk fine is resolved, and, in any
case, would only be delinquent if she paid less than $50 per
month, we remand to the district court to direct the
government to return Hughes’s tax refunds and to stop its
purported application of TOP so long as Hughes is not
delinquent under Treasury regulations viewed in light of the
corrected sentence.

                                  So ordered.
     BROWN, concurring in part and concurring in the
judgment. I join the court’s opinion to the extent it authorizes
Rule 36 clarifications. I also agree the determination of when
Ms. Hughes’ debt became due may affect the validity of the
Department of Justice’s referral to the Treasury Offset
Program. See United States v. Martinez, 2015 WL 9009626,
at *1, *6 (10th Cir. 2015) (“[T]he statutory scheme directs the
district court, not the government, to direct how and when the
defendant is to satisfy a restitution order. . . . The government
[can]not usurp the district court’s role by enforcing payments
not yet due under the court-ordered payment schedule.”).

     However, I do not join the Court’s discussion of the
viability of an APA challenge, in a criminal case, of the TOP
program’s alleged overreach. Too many questions remain
about the interplay between TOP and several criminal
restitution statutes, about whether Ms. Hughes received
adequate notice, and about whether an administrative
challenge to a TOP referral can be waived. These issues were
not squarely presented nor were they sufficiently briefed to
permit any confident assessment.

     I am, nevertheless, completely in sympathy with the
Court’s bold response. This is a case in which the
government behaved badly and—even when the unpalatable
implications of their actions became evident—exhibited
neither remorse nor gallantry. Politics is a form of violence;
and, in democracies, the monopoly on force is accorded to the
electoral victors. Bureaucratic institutions are justified by
their efficiency. That efficiency is enhanced because they
may invoke the threat of force to deter non-compliance. Even
so, an expectation remains that the resort to force will be
neither gratuitous nor grossly disproportionate.

     Ms. Hughes committed a crime. She acknowledged her
culpability and accepted responsibility. She was neither the
instigator of the fraudulent scheme nor its main beneficiary.
                               2
That dubious distinction went to her corporate employer—
Blackhawk. Ms. Hughes, who had lost her main source of
income and was on the verge of having her home foreclosed,
nevertheless began making her $50 a month payments. But
DOJ wasted no time referring her alleged debt to the
TOP program which immediately scooped up an $11,000 tax
refund—about the only cash available to Ms. Hughes. Paying
off this $442,000 debt at $50 per month would take nearly
740 years; seizure of her tax refund may have reduced the
reckoning by about 20 years. If the referral stands, Ms.
Hughes’ future tax refunds and even her Social Security
payments may also be seized by the government in
satisfaction of her restitutionary debt. The point is, no matter
how much suffering the government inflicts on Ms. Hughes,
the Department will never recover the full amount it is
allegedly owed. Yet there is no evidence the government ever
sought to criminally prosecute Blackhawk—the most culpable
party—a corporation that, so far as this record shows, has yet
to pay a cent. There is something very wrong with this
picture—so wrong Stevie Wonder could see the flaw from a
phone booth in Chicago. The fact that the government cannot
is deeply disturbing.