Court Opinion

ID: 4297643
Source: CourtListenerOpinion
Date Created: 2018-07-25 19:00:24.083398+00
Date Added: 2024-06-11T14:41:38.159761
License: Public Domain

PUBLISHED

                UNITED STATES COURT OF APPEALS
                    FOR THE FOURTH CIRCUIT

                                No. 14-4768

UNITED STATES OF AMERICA,

              Plaintiff - Appellee,

         v.

LORENE CHITTENDEN,

              Defendant – Appellant.

                                No. 14-4828

UNITED STATES OF AMERICA,

              Plaintiff - Appellee,

         v.

LORENE CHITTENDEN,

              Defendant – Appellant.

                                No. 15-4226

UNITED STATES OF AMERICA,

              Plaintiff - Appellee,

         v.
LORENE CHITTENDEN,

                     Defendant – Appellant.

                                       No. 15-4659

UNITED STATES OF AMERICA,

                     Plaintiff - Appellee,

            v.

LORENE CHITTENDEN,

                     Defendant – Appellant.

                 On Remand from the Supreme Court of the United States.
                                 (S. Ct. No. 17-5100)

                           Decided on Remand: July 25, 2018

Before GREGORY, Chief Judge, KEENAN, and FLOYD, Circuit Judges.

Affirmed in part, vacated in part, and remanded by published opinion. Chief Judge
Gregory wrote the opinion, in which Judge Keenan and Judge Floyd joined.

Joseph Ray Pope, WILLIAMS MULLEN, Richmond, Virginia, for Appellant. Christopher
John Catizone, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia,
for Appellee.

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GREGORY, Chief Judge:

       Lorene Chittenden was convicted of bank fraud and conspiracy to commit bank and

mail fraud for her role in a fraudulent mortgage scheme. Although Chittenden received

only $231,000 in proceeds from these crimes, the district court ordered her to forfeit over

$1 million to cover proceeds that her co-conspirators had received and dissipated. In

United States v. Chittenden, 848 F.3d 188 (4th Cir. 2017), we affirmed Chittenden’s

conviction and sentence. The Supreme Court later decided Honeycutt v. United States, 137
S. Ct. 1626 (2017), vacated our original decision in this case, and remanded for us to

reconsider our holding in light of Honeycutt. Chittenden v. United States, 138 S. Ct. 447,

447‒48 (2017) (mem.). For the reasons below, we now vacate the district court’s forfeiture

orders and remand for further proceedings. All other aspects of the district court’s

judgment are reaffirmed.

                                            I.

      In 2013, a federal grand jury indicted Lorene Chittenden for originating and

submitting fraudulent mortgage loan applications. 1 At the government’s request, the

district court restrained nearly all of Chittenden’s assets pending the outcome of the

charges. After a seven-day trial, a jury convicted Chittenden of one count of conspiracy to

commit bank and mail fraud, under 18 U.S.C. § 1349, and ten counts of bank fraud, under

18 U.S.C. § 1344. The evidence showed that Chittenden, a loan officer at George Mason

       1
       We recount only the facts and procedural history relevant to the issues on remand.
A complete summary is available in our original opinion. See 848 F.3d at 192‒94.
                                            3
Mortgage, earned hundreds of thousands of dollars in loan commissions by falsely inflating

the incomes of unknowing, first-time homebuyers. Higher stated incomes resulted in larger

loans, and because each commission was a percentage of the loan, larger loans generally

meant higher loan commissions. Chittenden worked in concert with numerous realtors

who received hefty real estate commissions by selling houses to her clients. Similar to the

loan commissions, each real estate commission was a percentage of the house’s sale price

such that higher sale prices resulted in greater profits for the realtors.

       Post-trial, the district court entered a forfeiture order under 18 U.S.C. § 982(a)(2),

pursuant to the procedures in 21 U.S.C. § 853. 2 The order consisted of a $1,513,378.82

money judgment “representing the foreseeable proceeds of the offenses of which the

defendant has been found guilty.” J.A. 1967. The court noted that Chittenden personally

had received only $231,000 in fraudulent loan commissions and that none of Chittenden’s

restrained assets were proceeds traceable to the fraud—indeed, the government had

       2
         See United States v. Cox, 575 F.3d 352, 355 n.2 (4th Cir. 2009) (“Section 982,
which authorizes criminal forfeiture in cases of bank fraud, incorporates the procedures set
forth in § 853.”). Although the forfeiture order cited two additional statutes—18 U.S.C.
§ 981(a)(1)(C) and 28 U.S.C. § 2461—those provisions do not apply in this case. The first,
§ 981(a)(1)(C), authorizes civil forfeiture for enumerated offenses, including bank fraud
and conspiracy to commit bank fraud. The second, § 2461, authorizes criminal forfeiture
for any offense that gives rise to civil forfeiture, including those enumerated in § 981. See
United States v. Chamberlain, 868 F.3d 290, 293 n.2 (4th Cir. 2017). But § 2461, and by
extension § 981, does not apply when a criminal forfeiture provision applies to the crime
charged. See United States v. Blackman, 746 F.3d 137, 142–43 (4th Cir. 2014). Here, a
criminal forfeiture provision does apply to the crimes charged: 18 U.S.C. § 982(a)(2)
provides that the court “shall order” forfeiture when imposing a sentence on a person
convicted of certain crimes affecting a financial institution, including bank fraud,
conspiracy to commit bank fraud, and conspiracy to commit mail fraud—the offenses listed
in Chittenden’s judgment of conviction. Accordingly, 18 U.S.C. § 982(a)(2), not 28 U.S.C.
§ 2461 and 18 U.S.C. § 981, served as the basis for the district court’s forfeiture order.
                                               4
stipulated as much. But, relying on our decision in United States v. McHan, 101 F.3d 1027

(4th Cir. 1996), the court concluded that Chittenden was jointly and severally liable for the

reasonably foreseeable proceeds of the conspiracy.

       Thereafter, because the government had not recovered any proceeds from

Chittenden’s co-conspirators, it moved for forfeiture of Chittenden’s untainted, restrained

assets to satisfy the entire $1,513,378.82 money judgment. Under 21 U.S.C. § 853(p), a

court “shall order the forfeiture of any [untainted] property of the defendant” when, “as a

result of any act or omission of the defendant,” the proceeds of the underlying crime have

been placed beyond the court’s reach. The district court found that Chittenden’s co-

conspirators had dissipated, comingled, or transferred their respective proceeds such that

the government was unable to locate or seize them. Relying on McHan again, the court

determined that § 853(p) required forfeiture of Chittenden’s untainted assets as a substitute

for her co-conspirators’ proceeds that the government could not recover. However, the

court found that the government had failed to prove that $250,000 of co-conspirator

proceeds and all $231,000 of Chittenden’s proceeds were in fact out of reach. Accordingly,

the court entered a second order reducing the amount of untainted assets the government

could take from $1,513,378.82 to $1,032,378.82.

       Chittenden appealed to this Court, challenging the initial seizure of her assets, the

validity of her conviction, and the forfeiture orders. See Chittenden, 848 F.3d at 192.

Specifically, she argued that the government’s pretrial seizure of her assets violated her

Sixth Amendment right to counsel, that the government failed to present sufficient

evidence to support her convictions, that the district court erred in admitting certain hearsay

                                              5
evidence, that the government constructively amended the indictment, that the district court

lacked jurisdiction to enter the forfeiture order, and that the district court improperly

ordered forfeiture of her untainted assets based on her co-conspirators’ acts of dissipating

the conspiracy proceeds. Id. at 194‒204. We rejected each of these arguments and

affirmed the district court’s judgment. Id. Chittenden petitioned the Supreme Court for

review.

       Following our decision, the Supreme Court decided Honeycutt v. United States, 137
S. Ct. 1626 (2017). The Court held that 21 U.S.C. § 853(a)(1)—which mandates forfeiture

of proceeds from certain drug crimes—limits such forfeiture “to property the defendant

himself actually acquired as the result of the crime.” Id. at 1635. “[T]he statute does not

countenance joint and several liability” for property the defendant’s co-conspirators alone

obtained. Id. at 1632‒33. The Court also stated that when tainted property falls outside

the government’s reach, § 853(p) does “not authorize the Government to confiscate

substitute property from other defendants or co-conspirators; it authorize[s] the

Government to confiscate assets only from the defendant who initially acquired the

property and who bears responsibility for its dissipation.” Id. at 1634.

       In light of this decision, the Supreme Court granted Chittenden’s writ of certiorari,

vacated our original judgment, and remanded the case to us for further consideration.

Chittenden v. United States, 138 S. Ct. 447, 447‒48 (2017) (mem.). We requested

supplemental briefing on what impact, if any, Honeycutt has on this case. Having received

the parties’ briefs, we now answer that question.

                                             6
                                            II.

       Honeycutt involved forfeiture under 21 U.S.C. § 853(a)(1), a provision of the

Controlled Substances Act that mandates forfeiture for certain drug crimes. 137 S. Ct. at

1630. Here, the district court ordered forfeiture under 18 U.S.C. § 982(a)(2), a general

criminal forfeiture statute that mandates forfeiture for a much broader range of crimes,

including bank and mail fraud. The procedures for ordering forfeiture in both cases are the

same—namely, those provided in 21 U.S.C. § 853(b)‒(c) and (e)‒(p). See 18 U.S.C.

§ 982(b)(1). 3 But the statutory authorizations, 21 U.S.C. § 853(a)(1) and 18 U.S.C.

§ 982(a)(2), clearly differ because they concern different crimes. Thus, our task is to

determine whether Honeycutt’s holding regarding the former applies to the latter.

       The Court in Honeycutt focused on the text of 21 U.S.C. § 853 to determine that

§ 853(a)(1) precludes co-conspirator liability. As the Court explained, the statute “defines

forfeitable property solely in terms of personal possession or use.” 137 S. Ct. at 1632.

Subsection (a)(1) limits forfeiture to “property constituting, or derived from, any proceeds

the person obtained, directly or indirectly, as the result of” the crime.        21 U.S.C.

§ 853(a)(1). To have “obtained” property, the Court said, the person must have personally

acquired it; one does not obtain property acquired by someone else. 137 S. Ct. at 1632–

       3
         Section 982(b)(1) states, “The forfeiture of property under this section, including
any seizure and disposition of the property and any related judicial or administrative
proceeding, shall be governed by the provisions of [21 U.S.C. § 853] (other than subsection
(d) of that section).” 18 U.S.C. § 982(b)(1). And 21 U.S.C § 853(a) and (q) by their terms
apply only to cases involving certain drug convictions. See 21 U.S.C. § 853(a), (q).
                                             7
33. And, while the words “directly” and “indirectly” modify the word “obtained,” they do

not erase the statute’s requirement that the person in fact obtain the property. Id. at 1633.

       The relevant text of 18 U.S.C. § 982(a)(2) mirrors that of 21 U.S.C. § 853(a)(1).

Section 982(a)(2) likewise limits forfeiture to “property constituting, or derived from,

proceeds the person obtained directly or indirectly, as the result of” the crime. 18 U.S.C.

§ 982(a)(2) (emphasis added).      Thus, Honeycutt’s interpretation of this language as

permitting forfeiture only of tainted property the defendant personally acquired applies

with equal force to 18 U.S.C. § 982(a)(2). See 137 S. Ct. at 1632‒33; cf. United States v.

Sexton, No. 17-5743, 2018 WL 3293471, at *6 (6th Cir. July 5, 2018) (describing phrase

“the person obtained” in § 853(a)(1) as “the linchpin of the Supreme Court’s decision in

Honeycutt”).

       The Honeycutt Court further found that 21 U.S.C. § 853(p)—“the sole provision of

§ 853 that permits the Government to confiscate property untainted by the crime”—makes

clear that the statute cannot permit joint and several liability. 137 S. Ct. at 1633.

Subsection (p) applies only if the government can prove that the defendant frustrated efforts

to recover “any property described in subsection (a)”—i.e., tainted property obtained by

the defendant. 21 U.S.C. § 853(p)(1). And, upon doing so, the government may confiscate

the defendant’s substitute assets only “up to the value of” the unrecoverable proceeds the

defendant acquired. See id. § 853(p)(2); Honeycutt, 137 S. Ct. at 1633‒34. This language,

the Court explained, demonstrates that “Congress did not authorize the Government to

confiscate substitute property from other defendants or co-conspirators; it authorized the

                                              8
Government to confiscate assets only from the defendant who initially acquired the

property and who bears responsibility for its dissipation.” 137 S. Ct. at 1634.

       As mentioned above, 18 U.S.C. § 982 expressly incorporates 21 U.S.C. § 853(p),

among the other procedures in § 853. See 18 U.S.C. § 982(b)(1); United States v. Cox, 575
F.3d 352, 355 n.2 (4th Cir. 2009).        This fact further supports the conclusion that

§ 982(a)(2), like § 853(a)(1), prohibits forfeiture of proceeds that the defendant herself did

not obtain.

       The one other circuit that has addressed whether Honeycutt applies to 18 U.S.C.

§ 982(a)(2) has concluded that it does. The Third Circuit held that because § 982(a)(2)

“shares several features with 21 U.S.C. § 853,” “the reasoning of Honeycutt applies”

equally. United States v. Brown, 694 F. App’x 57, 58 (3d Cir. 2017); United States v.

Brown, 714 F. App’x 117, 118 (3d Cir. 2018); see also United States v. Sanjar, 876 F.3d
725, 749 (5th Cir. 2017) (holding that, given similarities between 21 U.S.C. § 853(a)(1)

and 18 U.S.C. § 982(a)(7)—provision mandating forfeiture for health fraud and containing

language almost identical to § 982(a)(2)—“the same analysis should apply” to both).

       We also note that the Supreme Court’s decision in Honeycutt clearly abrogated this

Court’s prior decision in McHan, which held that 21 U.S.C. § 853(a) “is not limited to

property that the defendant acquired individually but includes all property that the

defendant derived indirectly from those who acted in concert with him in furthering the

criminal enterprise.” 101 F.3d at 1043 (emphasis added). McHan had reasoned that,

because § 853(o) directs courts to “liberally construe[]” § 853 “to effectuate its remedial

purposes,” 21 U.S.C. § 853(o), the word “indirectly” in § 853(a)—which authorizes

                                              9
forfeiture of property “obtained, directly or indirectly,” from the crime, id. § 853(a)(1)—

extends liability to co-conspirator proceeds. See 101 F.3d at 1043. And, McHan had

observed, the “imposition of vicarious liability under § 853 also resonates with established

criminal law principles.” Id. The Honeycutt Court rejected these arguments. It explained

that § 853(o) cannot negate the statute’s plain text limiting forfeiture to tainted property

the defendant obtained. 137 S. Ct. at 1635 n.2. Furthermore, the Court stated, the key

background principles for interpreting § 853 are those of forfeiture, not those of conspiracy

liability. Id. at 1634. And the history of forfeiture shows that it has long been restricted to

tainted property. Id. at 1634–35 (explaining that “[t]raditionally, forfeiture was an action

against the tainted property itself,” occurring “independent of, and wholly unaffected by

any criminal proceeding . . . against the defendant” (internal quotation marks and citation

omitted)).

       For the foregoing reasons, we now hold that forfeiture under 18 U.S.C. § 982(a)(2)

is limited to property the defendant acquired as a result of the crime. The statute does not

permit courts to hold a defendant liable for proceeds that only her co-conspirator acquired.

       Turning to the case at hand, it is clear that the district court’s forfeiture orders cannot

stand. The district court ordered Chittenden to forfeit $1,032,378.82 of her untainted assets

as a substitute for criminal proceeds that only her co-conspirators obtained. Indeed, the

court denied the government’s request to take an additional $231,000 of Chittenden’s

untainted assets because the government had failed to show that the $231,000 Chittenden

had acquired personally was unreachable. In short, none of the $1,032,378.82 represented

assets that Chittenden obtained from her crimes. The entire forfeiture amount consisted of

                                               10
property that, under 18 U.S.C. § 982(a)(2) and 21 U.S.C. § 853(p), was not subject to

forfeiture and that the government lacked authority to take.

       The government maintains that Chittenden has waived any argument that she is not

liable for her co-conspirators’ proceeds. Chittenden did concede below that over $1 million

of her untainted assets were subject to forfeiture under a theory of joint and several liability.

See, e.g., J.A. 1861‒62. She argues now, in her supplemental brief, that Honeycutt

precludes such liability. Generally, we do not consider issues not passed upon by the

district court. Holland v. Big River Minerals Corp., 181 F.3d 597, 605 (4th Cir. 1999)

(citing Singleton v. Wulff, 428 U.S. 106, 120 (1976)). “This rule applies with equal force

when a party attempts to raise an issue for the first time after remand.” Liberty Univ., Inc.

v. Lew, 733 F.3d 72, 103 (4th Cir. 2013). But we have recognized an exception to this rule

where “there has been an intervening change in the law recognizing an issue that was not

previously available.” Holland, 181 F.3d at 605‒06. That exception “applies when ‘there

was strong precedent’ prior to the change, such that the failure to raise the issue was not

unreasonable and the opposing party was not prejudiced by the failure to raise the issue

sooner.” Id. (citing Curtis Publ’g Co. v. Butts, 388 U.S. 130, 142‒45 (1967)); see also

Hawknet, Ltd. v. Overseas Shipping Agencies, 590 F.3d 87, 91‒92 (2d Cir. 2009) (“[A]

party cannot be deemed to have waived objections or defenses which were not known to

be available at the time they could first have been made . . . [T]he doctrine of waiver

demands conscientiousness, not clairvoyance, from parties.” (internal quotation marks and

citations omitted)); GenCorp, Inc. v. Olin Corp., 477 F.3d 368, 374 (6th Cir. 2007) (“The

intervening-change-in-law exception to our normal waiver rules . . . exists to protect those

                                               11
who, despite due diligence, fail to prophesy a reversal of established adverse precedent.”);

United States v. Washington, 12 F.3d 1128, 1139 (D.C. Cir. 1994) (“[I]t would be unfair,

and even contrary to the efficient administration of justice, to expect a defendant to object

at trial where existing law appears so clear as to foreclose any possibility of success.”).

       Given the circumstances of this case, the intervening-change-in-law exception

undoubtedly applies. Prior to Honeycutt, McHan was settled law in the Fourth Circuit.

Our decision there foreclosed any argument that the government could not hold Chittenden

liable in forfeiture for proceeds that only her co-conspirators obtained. See 101 F.3d at

1043; see, e.g., United States v. Jalaram, Inc., 599 F.3d 347, 359 (4th Cir. 2010) (King, J.,

concurring) (“[A]s the majority acknowledges, the law in this Circuit is that coconspirators

are jointly and severally liable for the reasonably foreseeable proceeds obtained by the

conspiracy, regardless of the individual coconspirator’s share therein. This principle is

well established[.]” (citing McHan, 101 F.3d at 1043)); United States v. Bollin, 264 F.3d
391, 419 (4th Cir. 2001) (“[A]though [the defendant] received only about $30,000, he is

liable in a [$1.2 million] forfeiture judgment for the foreseeable criminal conduct of his co-

conspirators.” (citing McHan, 101 F.3d at 1043)). Indeed, nearly all other circuits to

address the question had similarly concluded that conspiracy liability principles applied to

forfeiture. See Honeycutt, 137 S. Ct. at 1631 n.1 (collecting cases). Chittenden’s initial

concession was therefore reasonable, and even wise. We cannot fault her—or the district

court—for relying on our precedent and not prophesying Honeycutt. Nor can we see any

prejudice to the government.       Both parties had an equal opportunity to brief the

implications of Honeycutt in this Court, and both will have an opportunity to re-litigate the

                                             12
forfeiture amount in the district court on remand. Accordingly, Chittenden has not waived

her right to object to the district court’s forfeiture orders on the ground that post-Honeycutt

she is not liable for conspiracy proceeds she never obtained.

                                             III.

       In light of the Supreme Court’s decision in Honeycutt, we hold that 18 U.S.C.

§ 982(a)(2) precludes joint and several forfeiture liability. Accordingly, we vacate the

district court’s forfeiture orders and remand for reassessment of the appropriate forfeiture

amount per this opinion. We otherwise affirm the district court’s judgment for the reasons

set forth in our original opinion. See Chittenden, 848 F.3d 188.

                           AFFIRMED IN PART, VACATED IN PART, AND REMANDED

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