Court Opinion

ID: 3134203
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:01:07.509296+00
Date Added: 2024-06-11T07:38:28.836970
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,                No. 14-50261
              Plaintiff-Appellee,
                                          D.C. No
               v.                     3:12-cr-02998-L-1

ROXANNE LYNN EYRAUD,
          Defendant-Appellant.            OPINION

     Appeal from the United States District Court
        for the Southern District of California
   M. James Lorenz, Senior District Judge, Presiding

               Argued and Submitted
       September 3, 2015—Pasadena, California

                Filed October 22, 2015

  Before: Diarmuid F. O’Scannlain, Stephen S. Trott,
           and Jay S. Bybee, Circuit Judges.

                Opinion by Judge Trott
2                  UNITED STATES V. EYRAUD

                           SUMMARY*

                          Criminal Law

     The panel affirmed the district court’s restitution order in
a case in which the defendant, who pled guilty to bank fraud,
stole $264,824.10 from her employer Rhino Building
Services (RBS).

    The panel explained that the restitution authorization in
18 U.S.C. § 3663A(b)(4) covers the entirety of attorneys’ fees
awarded to RBS, not just those incurred leading up to and
during the grand jury proceedings, where RBS incurred those
fees as part of its continuing investigation of the extent of the
defendant’s thievery. The panel held that the district court’s
findings and determinations are fully supported by the
evidence. The panel wrote that contrary to counsel’s claim
about the district court’s supposed ignorance of the
“reasonably necessary” test, the district court was manifestly
aware of the law governing an award of attorneys’ fees. The
panel held that the district court properly concluded that
RBS’s taxes and penalties were foreseeable and directly and
proximately caused by the defendant’s embezzlement. The
panel wrote that the district court had no obligation to defer
to any abatement of penalties negotiated between RBS and
the IRS.

    The panel wrote that contrary to counsel’s argument, the
district court did not, in reducing RBS’s requested attorneys’
fees by $53,148.50, conclude that the fees incurred were not

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                UNITED STATES V. EYRAUD                     3

reasonably necessary, just that the billing rate charged was
too high.

    The panel rejected the defendant’s statutory and due
process challenges to the district court’s reviewing counsel’s
original billing invoices in camera.

    The panel rejected as foreclosed the defendant’s argument
that after Paroline v. United States, 134 S.Ct. 1710 (2014), a
jury, not a judge, must make the factual findings that support
an order of restitution.

                        COUNSEL

Joseph S. Camden (argued), Federal Defenders of San Diego,
Inc., San Diego, California, for Defendant-Appellant.

Laura E. Duffy, United States Attorney, Peter Ko, Assistant
United States Attorney, Chief, Appellate Section Criminal
Division, Melanie K. Pierson (argued), Assistant United
States Attorney, United States Attorneys’ Office, San Diego,
California, for Plaintiff-Appellee.

                         OPINION

TROTT, Senior Circuit Judge:

                              I

   Over a two-year period, Roxanne Eyraud stole
$264,824.10 from her employer Rhino Building Services
(“RBS”). Her embezzlement scheme involved writing extra
4                UNITED STATES V. EYRAUD

payroll checks both to herself and to other unknowing
employees. She forged her employer’s signature on the
checks, cashed them, and kept all the money for herself.
Also, she mischaracterized thirty-four entries in RBS’s
Quickbooks accounting program as tax payments made by
company check to the Internal Revenue Service (“IRS”)
covering the period from November, 2006 to June, 2008.
These bogus checks totaled $82,348.90 – money owed to the
IRS but not remitted. The phantom check payments entered
into Quickbooks were actually made payable to and cashed
by Eyraud. She hid the paper checks to conceal her forgery.

   RBS discovered part of Eyraud’s theft in 2008 when an
auditor spotted approximately $150,000 worth of bogus
checks. She confessed and covered the loss with $150,000
from a well-to-do relative. Eyraud did not alert RBS to the
approximately $145,887.97 the auditor had not yet spotted,
nor did she tell the company she had kept for herself the
money listed in Quickbooks as paid to the IRS. The rest of
Eyraud’s thefts came to light in 2010.

                              II

    Pursuant to a negotiated agreement, Eyraud pleaded guilty
to bank fraud in violation of 18 U.S.C. § 1344, one count of
a ten count indictment. The court eventually sentenced her to
time served with three years of supervised release. In
addition, the court ordered her to pay restitution to RBS in the
amount of $425,445.44. This total included (1) $114,224.10
in unrecovered stolen money, (2) $128,372.02 in tax
deficiencies and penalties caused by her fraud, (3) $9,052 for
forensic accounting fees, and (4) $173,797.32 in attorneys’
fees.
                UNITED STATES V. EYRAUD                    5

                             III

    Because the March 11, 2013, plea agreement was
negotiated before RBS’s full loss had been calculated, the
agreement obligated the government to recommend
restitution in the amount of only $145,887.97. This number
represented Eyraud’s embezzled funds not yet repaid
($114,824.10) and the resulting tax penalties and interest
known as of the date of the agreement ($31,063.87). The sum
did not include RBS’s attorneys’ fees. On June 5, 2013, the
Probation Office informed the court that RBS would be
seeking considerably more in restitution than the amount
specified in the plea agreement. Attorneys’ fees now became
an issue.

    At a sentencing hearing on September 23, 2013, RBS
appeared in court with private counsel to justify its request
for additional restitution. RBS’s appearance triggered a
series of additional hearings and multiple dueling
submissions by both RBS and Eyraud. On March 27, 2014,
RBS supplemented its request with twenty-six invoice
summaries – not the original invoices themselves – for
attorneys’ fees paid by RBS showing the attorney involved,
the number of hours worked, and the hourly rate of each
attorney. RBS also produced an eight-page sworn declaration
from their attorney explaining his law firm’s billing policy,
the extent of the legal and investigative work performed, and
the resumés of the attorneys who performed the work, as well
as a summary of the tax damage done to RBS by Eyraud’s
scheme, calculated by quarter. Counsel’s declaration asserted
that the withheld original invoices contained information
protected by both the attorney client and/or work product
privileges.
6                UNITED STATES V. EYRAUD

     At a contested hearing on April 3, 2014, RBS refined its
request, and the court took the issue of restitution under
submission, setting Eyraud’s sentencing for April 24, 2014.
Because of its plea agreement, the government continued to
sit on the restitution sidelines.

    On April 21, 2014, the court asked for the original
invoices relating to the summaries previously submitted. The
court said that it wanted to review the “billing rate and work
completed by each attorney . . . .” On April 23, 2014, RBS
filed the requested documentation ex parte, “for court’s eyes
only,” and in camera, once again asserting the attorney client
and/or work product privileges regarding “communications
and information” in the originals.

     On April 24, the court sentenced Eyraud, but set a later
date to determine attorneys’ fees and prejudgment interest.
The court denied Eyraud’s counsel’s request for the original
invoices, saying, “Well I’m not inclined to turn over the
billing records, but when I rule, I will . . . explain my ruling
to such a degree that you would be able to make any
objections.”

   Final judgment day arrived on May 29, 2014, almost one
year after RBS entered the fray on its own behalf.

     In explaining its analysis and findings of fact and
conclusions of law, the court indicated that the “backup
billing documentation” RBS had provided was consistent
with the invoice summaries. The court added that the
attorneys had been careful not to include any fees not related
to Eyraud’s criminal case. True to its promise, the court
explained its ruling in thoughtful detail. Counsel renewed his
objection to the court’s decision not to give him access to the
                UNITED STATES V. EYRAUD                     7

original invoices. Counsel voiced his understanding that
“implicit in the . . . [court’s] order” was a denial of his
assertion that the material he sought was not protected by any
privilege.

                             IV

                           Issues

    Eyraud presents us with six issues. First, whether the
district court “erred in concluding that the attorneys’ fees
incurred by RBS were reasonably necessary.” In his reply
brief, however counsel takes a different tack, now claiming
that the district court failed to apply the “reasonably
necessary” test, and was ignorant of the test altogether.

    Second, whether the court denied statutory and
constitutional due process to Eyraud in denying access to the
original billing invoices submitted in camera by RBS.

   Third, whether the district court failed to account for
$85,402.32 in the amount of attorneys’ fees awarded.

   Fourth, whether the court erred in finding that RBS’s tax
penalty and interest loss were proximately caused by
Eyraud’s conduct.

    Fifth, whether the IRS’s abatement of 30% of the
delinquent tax payments and interest was the true measure of
Eyraud’s damage to RBS, not the 70% Eyraud paid to the
government.
8               UNITED STATES V. EYRAUD

    Sixth, whether after Paroline v. United States, 134 S.Ct.
1710 (2014), a jury, not a judge, must make the factual
findings that support an order of restitution.

                              V

                    Standard of Review

    We review the district court’s restitution order “for an
abuse of discretion, provided it is within the bounds of the
statutory framework. Factual findings supporting an order of
restitution are reviewed for clear error.” United States v.
Waknine, 543 F.3d 546, 555 (9th Cir. 2008) (citation
omitted). We review de novo Eyraud’s due process claims.

                             VI

                      Attorneys’ Fees

    A. The Law

     The Mandatory Victims Restitution Act (“MVRA”),
18 U.S.C. § 3663A, requires a district court to “order a
defendant to make restitution to a victim of certain specified
offenses.” United States v. Anderson, 741 F.3d 938, 951 (9th
Cir. 2013)(citation omitted). The amount of restitution is
limited to the victim’s “actual losses” that are a direct and
proximate result of the defendant’s offense. United States v.
Hunter, 618 F.3d 1062, 1064 (9th Cir. 2010). The MVRA
lists certain losses that are undoubtably compensable,
including “expenses incurred during participation in the
investigation or prosecution of the offense.” § 3663A(b)(4).
However, so long as any loss – not just those incurred during
investigation or prosecution – is an “actual loss” suffered as
                UNITED STATES V. EYRAUD                     9

a result of a defendant’s qualifying crime and the MVRA’s
causation standard is satisfied, a district court must include
the amount of that loss in its restitution order. See Hunter,
618 F.3d at 1064; United States v. Peterson, 538 F.3d 1064,
1074 (9th Cir. 2008).

    Normally but not exclusively, the government proves the
amount of loss and causation by a preponderance of the
evidence. See Peterson, 538 F.3d at 1074–75. However, the
statute setting the procedure for awarding restitution under
the MVRA, 18 U.S.C. § 3664, also “authorizes the district
court to allow a victim to prove up its own claim for
restitution when the court deems it appropriate to do so.”
United States v. Gamma Tech Indus., Inc., 265 F.3d 917, 924
(9th Cir. 2001).

    When a victim does prove up its claim, it does not do so
as a formal party to the proceedings, but as someone damaged
by the defendant’s crime. Id. at 924–25; §§ 3663(a)(1)(A);
3664(a). We note that in Gamma Tech, the government
vigorously opposed allowing the third-party victim to bring
its own restitution request. See Gamma Tech, 265 F.3d at
922. Here, RBS was similarly left to fend for itself in its
request for restitution because the government’s earlier plea
deal with Eyraud tied its hands.

    A meaningful difference exists between the role a victim
like RBS plays at a restitution hearing and that of the
prosecutor. See United States v. Alverson, 666 F.2d 341, 349
(9th Cir. 1982). The victim’s interest is focused on making
itself whole. The non-party victim does not advocate for a
larger fine or longer prison sentence. And even if the victim
were to do so, the district court would be powerless to
10               UNITED STATES V. EYRAUD

increase the amount of restitution for solely punitive reasons.
See Hunter, 618 F.3d at 1064.

     B. Analysis

    The law is settled that a court may include attorneys’ fees
in a restitution order when the victim incurred the expenses
to participate in law enforcement’s investigation and
prosecution of a defendant. See § 3663A(b)(4); United States
v. Gordon, 393 F.3d at 1044, 1057 (9th Cir. 2004). To
qualify as investigation costs under § 3663A(b)(4), the fees
must be “reasonably necessary” to aid in the investigation or
prosecution of the defendant. See Waknine, 543 F.3d at 559.
This principle covers the portion of attorneys’ fees that RBS
incurred during its initial criminal investigation alongside the
FBI into Eyraud’s fraud and during the grand jury
proceedings. See Gordon, 393 F.3d at 1057 (approving
“investigation costs [that] were incurred in response to five
grand jury subpoenas and a number of government requests
requiring [the victim] to analyze vast amounts of
documentation and electronic information”).

    However, this is not the end of the story. We have
adopted “a broad view of the restitution authorization [for
investigation costs],” holding that “investigation costs –
including attorneys’ fees – incurred by private parties as a
direct and foreseeable result of the defendant’s wrongful
conduct may be recoverable.” Gordon, 393 F.3d at 1056–57
(citations omitted) (alteration in original). For instance, in
United States v. Cummings, 281 F.3d 1046, 1051–53 (9th Cir.
2002), we concluded that § 3663(b)(4) – the companion
statute to § 3663A(b)(4) – was broad enough to serve as the
basis for a restitution award for a mother’s attorneys’ fees in
a separate child custody proceeding where the father had
                 UNITED STATES V. EYRAUD                     11

improperly retained the children abroad. We have concluded
that the MRVA is similarly expansive. See United States v.
Hayward, 359 F.3d 631, 642 (9th Cir. 2004) (holding that
parents were entitled to restitution under § 3663A(b)(4) for
“reasonable costs in obtaining the return of their victimized
children from London and in making their children available
to participate in the investigation and trial”).

    The textual reach of § 3663A(b)(4) manifestly covers the
entirety of the attorneys’ fees awarded to RBS, not just those
incurred leading up to and during the grand jury proceedings.
RBS incurred those fees as part of its continuing investigation
of the extent of Eyraud’s thievery. Eyraud created the need
for this investigation by concealing the full measure of her
wrongdoing when she was first confronted and then cutting
a favorable deal with the government before RBS discovered
the extent of her crime. Because she had disguised her
scheme through multiple false entries in the company’s
Quickbooks and tax ledger, Eyraud should have anticipated
– especially after her lack of candor – that unearthing the full
consequences of her embezzlement would take additional
time, effort, and money.

    As GammaTech holds, a victim may prove up its own
claim for restitution. Section 3664(d)(4) invites a victim
seeking recompense privately to submit in camera
information and documents revealing the full amount of a
loss. In light of the MVRA’s broad remedial purpose and the
statutes implementing that purpose, it stands to reason that
the term “investigation” must cover a victim’s reasonable
investigation, not only one conducted by a government
agency. Consequently, the award of attorneys’ fees to RBS
was proper.
12              UNITED STATES V. EYRAUD

    An examination of the district court record through the
prism of the relevant statutes and cases reveals no error or
failure to exercise appropriate discretion. The court’s
consideration of RBS’s interests as well as Eyraud’s was
thorough and a model of careful due process. The court’s
findings and determinations are fully supported by the
evidence, including the court’s decision about RBS’s tax
penalty and interest loss. Eyraud’s cooked Quickbooks were
directly responsible for the IRS penalties incurred by RBS.
Contrary to counsel’s claim about Judge Lorenz’s supposed
ignorance of the appropriate test, the court was manifestly
aware of the law governing an award of attorneys’ fees.

    Moreover, the court properly concluded that RBS’s taxes
and penalties were foreseeable and directly and proximately
caused by Eyraud’s embezzlement, with no break in the chain
of causation. An intervening cause that is not “directly
related to the offense conduct” will sever the causal chain.
United States v. Meksian, 170 F.3d 1260, 1263 (9th Cir.
1999); see also Gamma Tech, 265 F.3d at 928 (“The causal
chain may not extend so far, in terms of the facts or the time
span, as to become unreasonable.”). Nevertheless, the
“[d]efendant’s conduct need not be the sole cause of the
loss,” and “we have approved restitution awards that included
losses at least one step removed from the offense conduct
itself.” Id.

    In United States v. Peterson, 538 F.3d 1064 (9th Cir.
2008), we rejected an argument similar to Eyraud’s. There,
homebuilders were convicted of submitting gift letters that
falsely claimed that borrowers had received the down
payments for HUD-insured home loans from their relatives,
rather than from the homebuilders. Id. at 1067–69. When the
borrowers defaulted on their loans, the district court ordered
                 UNITED STATES V. EYRAUD                     13

the homebuilders to compensate HUD for its losses. The
homebuilders argued that HUD’s losses were caused by the
borrowers defaulting on the loans, not the fraudulent gift
letters. Id. at 1077. We held that the borrowers’ default was
not a superceding cause that relieved the homebuilders’
restitution obligation because the borrowers would not have
qualified for the loans in the first instance without the false
letters. Id.

     Similarly, Eyraud’s fraud was the first link in the causal
chain. The period for which RBS sought to recover its tax
deficiencies and losses began at a time when it was current on
its taxes. It was only after Eyraud depleted RBS’s coffers and
entered false tax payments on the books that RBS again fell
behind on its payments to the IRS. As the district court
found, Eyraud’s theft “created the circumstances under which
the harm or loss occurred.” Meksian, 170 F.3d at 1263
(quoting United States v. Spinney, 795 F.2d 1410, 1417 (9th
Cir. 1986)). Moreover, RBS’s restitution request focused on
the time period most directly related to Eyraud’s losses. As
a result, it was reasonable to hold Eyraud responsible for
RBS’s taxes that had gone unpaid and the penalties incurred
as a result of Eyraud’s fraud.

    Contrary to Eyraud’s assertion, the negotiated amount of
the IRS’s abatement did not relieve the court of its
responsibility to determine the amount of loss. See
§ 3664(f)(1)(A) (commanding that “[i]n each order of
restitution, the court shall order restitution to each victim in
the full amount of each victim’s losses as determined by the
court”). Quite simply, the IRS did not determine the amount
of restitution owed to RBS because of Eyraud’s fraud, and the
district court had no obligation to defer to any reduction in
penalties negotiated between RBS and the IRS.
14              UNITED STATES V. EYRAUD

    Furthermore, by examining the original invoices, the
court reduced RBS’s requested attorneys’ fees by $53,148.50.
Contrary to counsel’s unsupported argument, the court did
not conclude in making this reduction that the fees incurred
were not reasonably necessary, just that the billing rate
charged was too high.

    Counsel’s assertion that the court overlooked $85,405.32
of RBS’s request is without merit. The colloquy between
court and counsel reveals without ambiguity that the court
had approved the requested total minus the familiar lodestar
reduction. Counsel said he understood the amount being
requested and that the court had approved was “a total of
$226,995.32.” At the time, counsel said nothing about a
missing $85,405.32, and he did not respond when the court
said, “I can be more specific as far as the amounts of money
by the different attorneys. I don’t know if that’s what you’re
interested in.” One wonders why counsel did not timely raise
this question during the hearing when given the opportunity
to request clarification on the precise amounts awarded.

    As the district court explained at the restitution hearing,
RBS’s requested attorneys’ fees included $35,162.50 in
“grand jury billings” and $71,265.00 for “restitution billing,”
two figures that total to $106,427.50. The court went on to
explain that after reducing the attorneys fees via the lodestar
method, the court had landed on $173,797.32 as the final
amount owed. Though Eyraud’s math is not quite accurate,
what we gather to be counsel’s contention is that there is a
gap between the attorneys fees that the district court
explained orally at the restitution hearing ($106,427.50) and
the attorneys fees later awarded by the district court
($173,797.32).
                 UNITED STATES V. EYRAUD                      15

    The transcript demonstrates that the district court was not
attempting to give a thorough accounting of every invoice
submitted by RBS, but rather highlighting several of RBS’s
primary requests. Indeed, the court only orally discussed
invoices 8, 9, and 11–21, leading us to the obvious inference
that invoices 1–7 and 10 contained additional billing requests
that the court did not orally address. If counsel had wanted
further clarification, he should have requested it when given
precisely that opportunity.

                              VII

                         Due Process

    A. Statutory Procedure

    Counsel argues that his client had a statutory right to
access counsel’s original invoices. 18 U.S.C. § 3664 and
Federal Rule of Criminal Procedure 32 govern how a
restitution award is set. § 3664(c). Under § 3664(a), a
district court must order the probation officer “to obtain and
include in its presentence report, or in a separate report, . . .
information sufficient for the court to exercise its discretion
in fashioning a restitution order.” Once the report is
complete, § 3664(b) requires the district court to “disclose to
both the defendant and the attorney for the Government all
portions of the presentence or other report . . . described in
subsection (a) of this section” – in other words, the reports
that probation prepared.

    Counsel relies entirely on subsections (a) and (b) to argue
that the district court improperly reviewed the billing
statements in camera. His argument is patently flawed.
Those sections are inapposite. RBS’s in camera invoices
16               UNITED STATES V. EYRAUD

were not part of probation’s report. They were submitted
separately to comply with the district court’s careful order.
Therefore, the applicable subsection is (d)(4), not subsections
(a) and (b). Subsection (d)(4) says, “After reviewing the
report of the probation officer, the court may require
additional documentation or hear testimony. The privacy of
any records filed, or testimony heard, pursuant to this section
shall be maintained to the greatest extent possible, and such
records may be filed or testimony heard in camera.” This
section requires the district court to protect the privacy of
RBS’s submissions “to the greatest extent possible,” and
specifically authorized the submission of the documents in
camera. Accordingly, there was no statutory error.

     B. Due Process

    We begin by noting that counsel did not protect the record
on this issue by asking the district court for a protective order
preserving the original invoices under seal so they might be
reviewed on appeal. 9th Cir. R. 27-13. This lapse leaves us
with the district court’s description of them as simply
corroborative of what counsel already had seen. That being
the unchallenged state of the record, Eyraud was not denied
due process – unless we were to conclude somehow that
§ 3664(d)(4) is unconstitutional on its face, which we do not.

    To date, no circuit to consider the argument has
concluded that the Due Process Clause requires full
disclosure of all the information relied on by a court at
sentencing. Stewart v. Erwin, 503 F.3d 488, 495 (6th Cir.
2007) (observing “the federal appellate courts that have
considered this issue have uniformly concluded that”
Supreme Court precedent “do[es] not recognize such a federal
due process right to full disclosure”); United States v. Curran,
                UNITED STATES V. EYRAUD                    17

926 F.2d 59, 62 (1st Cir. 1991) (“[T]here is no judicial
precedent which holds that the Due Process Clause requires
disclosure of all information relied upon by the sentencing
court.”). We have endorsed a similar conclusion in United
States v. Baldrich, 471 F.3d 1110, 1114–15 (9th Cir. 2006),
where we considered the constitutionality of Federal Rule of
Criminal Procedure 32(e)(3) which permits a district court to
withhold probation’s sentencing recommendation from the
defendant. We held that Rule 32(e)(3) does not violate due
process, so long as a defendant is appraised of the “factual
information underlying” the recommendation. Id. at 1114.
A similar principle governs this case.

    Prior to sentencing, Eyraud had access to the law firm’s
declaration describing the work it performed relating to
Eyraud’s fraud and the invoice summaries listing the amount
of time that work took. The district court confirmed that
those documents accurately reflected the pertinent
information contained in the privileged billing records. Thus,
counsel had “the factual information underlying” the ruling.
Baldrich, 471 F.3d at 1114. With this information in hand,
Eyraud was able to challenge the legal basis for the court’s
order. Eyraud was afforded adequate notice and a meaningful
opportunity to be heard.

    Finally, United States v. Green, 722 F.3d 1146 (9th Cir.
2013), forecloses counsel’s pro forma invocation of Paroline
v. United States, 134 S.Ct. 1710 (2014), to undo the district
court’s work. We held in Green that Apprendi v. New Jersey,
530 U.S. 466 (2000), does not apply to restitution orders, and
Paroline does not invalidate that holding.

   AFFIRMED.