Court Opinion

ID: 2968447
Source: CourtListenerOpinion
Date Created: 2015-09-22 05:14:29.618917+00
Date Added: 2024-06-11T13:14:13.383968
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,               
                 Plaintiff-Appellee,
                 v.                             No. 06-4210
MARC J. BLATSTEIN,
              Defendant-Appellant.
                                        
UNITED STATES OF AMERICA,               
                 Plaintiff-Appellant,
                 v.                             No. 06-4285
MARC J. BLATSTEIN,
               Defendant-Appellee.
                                        
           Appeals from the United States District Court
         for the Eastern District of Virginia, at Richmond.
            Richard L. Williams, Senior District Judge.
                       (3:05-cr-00216-RLW)

                      Argued: March 14, 2007

                      Decided: April 12, 2007

           Before MICHAEL and KING, Circuit Judges,
              and HAMILTON, Senior Circuit Judge.

Affirmed in part, vacated in part, and remanded by published opinion.
Judge King wrote the opinion, in which Judge Michael and Senior
Judge Hamilton concurred.
2                     UNITED STATES v. BLATSTEIN
                              COUNSEL

ARGUED: David Glenn Barger, WILLIAMS MULLEN, McLean,
Virginia, for Appellant/Cross-Appellee. Laura C. Marshall, Assistant
United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Richmond, Virginia, for Appellee/Cross-Appellant.
ON BRIEF: Michael R. Sklaire, WILLIAMS MULLEN, McLean,
Virginia, for Appellant/Cross-Appellee. Chuck Rosenberg, United
States Attorney, Alexandria, Virginia, for Appellee/Cross-Appellant.

                              OPINION

KING, Circuit Judge:

   Marc J. Blatstein appeals the denial of his motion to suppress evi-
dence discovered by federal agents conducting warrant searches of his
office and residence in Fredericksburg, Virginia. After having his
suppression motion denied, Blatstein was convicted in the Eastern
District of Virginia of one count of mail fraud, in contravention of 18
U.S.C. § 1341. This conviction was predicated on Blatstein’s condi-
tional guilty plea, pursuant to which he reserved his right to appeal
the court’s adverse suppression ruling. Blatstein contends that the evi-
dence underlying his conviction was obtained through the execution
of constitutionally invalid search warrants. The Government, mean-
while, has cross-appealed Blatstein’s sentence of 12 months and one
day in prison. As explained below, we affirm the denial of Blatstein’s
suppression motion, but vacate his sentence and remand.

                                   I.

   Defendant Marc J. Blatstein was a licensed podiatrist who operated
a solo podiatry practice in a Fredericksburg strip mall. In May 2004,
federal law enforcement officials began to investigate Blatstein’s
practice, based on their suspicion that he was fraudulently billing his
patients’ health insurers. On July 14, 2004, in the course of this inves-
tigation, FBI Agent Jeffrey Howard sought warrants to search
Blatstein’s office and residence for records relating to his practice’s
billing and finances. Agent Howard submitted an affidavit to a United
                      UNITED STATES v. BLATSTEIN                       3
States magistrate judge in support of his warrant applications (the "af-
fidavit"). The affidavit asserted that there was probable cause to
believe Blatstein had violated 18 U.S.C. §§ 1347 and 1341, which,
respectively, prohibit health care fraud and mail fraud.

   The affidavit explained the pertinent federal statutes as follows:
Section 1347 of Title 18 makes it an offense for any person to know-
ingly and willfully execute, or attempt to execute, a scheme or artifice
to (1) defraud any health care benefit program; or (2) obtain, by
means of false or fraudulent pretenses, representations, or promises,
any of the money or property owned by, or under the custody or con-
trol of, any health care benefit program. A "health care benefit pro-
gram," for purposes of § 1347, is "any public or private plan or
contract, affecting commerce, under which any medical benefit, item,
or service is provided to any individual." 18 U.S.C. § 24(b). Section
1341 makes it an offense to use the United States mail to execute a
scheme or artifice to defraud. 18 U.S.C. § 1341.

   The affidavit of Agent Howard provided detailed information indi-
cating that Blatstein had contravened §§ 1347 and 1341. According
to the affidavit, Blatstein had billed his patients’ insurers for the use
of outpatient surgical facilities provided by an entity called the Cen-
tral Park Ambulatory Surgical Center ("CPASC"), which had no
physical existence and was not known to or licensed by the Common-
wealth of Virginia. In this regard, the affidavit reported information
obtained from two former employees of Blatstein, whom the affidavit
designated Cooperating Witnesses 1 ("CW-1") and 2 ("CW-2"). CW-
1 advised investigators that Blatstein billed surgical facility fees for
procedures performed at his podiatry office, despite CW-1’s repeated
warnings to Blatstein that he could not legitimately charge such fees
for procedures not performed at a physically separate facility. CW-1
also related that, although Blatstein’s employees handled billing for
other procedures, Blatstein insisted on personally completing the
paperwork relating to his billing for surgical facilities. According to
the affidavit, Blatstein did not disclose to CW-1 his practice of sub-
mitting bills that purported to be from CPASC. In fact, CW-1 first
heard of CPASC not from Blatstein, but from someone who called a
telephone line reserved for Blatstein’s exclusive use and asked for the
Central Park Ambulatory Surgery Center.
4                     UNITED STATES v. BLATSTEIN
   CW-2, the other former Blatstein employee relied on in Agent
Howard’s affidavit, informed investigators that Blatstein had rented
a post office box at a Parcel Plus store near his podiatry office and
had represented that the address of the Parcel Plus — 1285 Carl D.
Silver Parkway — belonged to CPASC. According to the affidavit,
Blatstein listed 1285 Carl D. Silver Parkway as CPASC’s address on
the bills he sent to health insurers, mailed those bills from the Parcel
Plus in which the box was located, and used the box to receive pay-
ments directed to CPASC. CW-2 also reported that Blatstein had sub-
mitted bills in CPASC’s name on a form called UB-92, which had
been developed by the federal Health Care Financing Administration
for hospitals to use in billing for facility charges. CW-2 advised that
she had received several telephone complaints from patients question-
ing the facility fees that had been billed in connection with their visits
to Blatstein; one such patient even threatened to sue Blatstein. And,
according to CW-2, on one occasion Blue Cross/Blue Shield had
forced Blatstein to return a facility fee he had been paid. CW-2
reported that, after this incident, Blatstein stopped billing Blue
Cross/Blue Shield for facility fees.

   The affidavit also related the reports of several of Blatstein’s
patients, including Lyndon Friend, for whom Blatstein had removed
an ingrown toenail. Mr. Friend’s wife, Katrina Friend, informed
investigators that when her husband visited Blatstein’s office, she
noticed a yellow carbon sheet behind some of the paperwork her hus-
band was signing. When Mrs. Friend lifted the top sheet to see what
was on the carbon, one of Blatstein’s employees noticed her doing so
and demanded the paperwork back. Mrs. Friend refused to return the
paperwork, and the employee summoned Blatstein, who attempted to
physically wrestle the documents away from Mrs. Friend. Mrs. Friend
ripped the paper into pieces and left the office with them. She later
pieced together the torn documents, and realized that the top sheet
bore the heading "Dr. Marc Blatstein, LPM, PC," while the carbon,
although identical to the top sheet in all other respects, was headed
"Central Park Ambulatory Surgery Center, Inc." J.A. 21.1
    1
   Citations herein to "J.A. ___" refer to the contents of the Joint Appen-
dix filed by the parties in this appeal.
                       UNITED STATES v. BLATSTEIN                         5
   Another patient described in the affidavit was identified only as
"G.S." Around May 2000, Blatstein had treated G.S. for an ingrown
toenail. G.S.’s insurer had subsequently received two bills relating to
G.S.’s visit to Blatstein. One of these bills was a professional claim
for Blatstein, in the sum of $397. The other bill was from CPASC,
and claimed $2,595 for itemized hospital charges, including a recov-
ery room. G.S., however, informed the federal investigators that she
had never heard of CPASC, and that all of her treatment from
Blatstein had occurred in one room.

   The affidavit related similar incidents involving two other patients
who were insured by the federal Mail Handlers Benefit Plan
("MHBP"). One of the MHBP incidents involved a $12,452 claim
from CPASC for itemized hospital charges, including charges for a
pre-operation holding room, an operating room, and a recovery room.
The other MHBP incident involved $4,454 in charges from CPASC,
including charges for a recovery room and operating room. The
MHBP insureds whose treatment was the basis for these charges
informed investigators that they had never heard of CPASC or been
treated in such facilities.

   On July 14, 2004, the date of Howard’s search warrant application,
the United States magistrate judge issued the warrants that Agent
Howard sought (the "search warrants"). On July 27, 2004, federal
authorities executed the search warrants, searching Blatstein’s office
and residence, and discovering evidence of his billing scheme. On
June 20, 2005, a federal grand jury in Virginia’s Eastern District
indicted Blatstein on one count of health care fraud, in contravention
of 18 U.S.C. § 1347, and seven counts of mail fraud, in violation of
18 U.S.C. § 1341.

   The next day, June 21, 2005, Blatstein moved to suppress all evi-
dence seized in the searches of his business and residence, and
requested a Franks hearing to address his suppression contention.2 On
  2
    The Supreme Court’s decision in Franks v. Delaware, 438 U.S. 154
(1978), obliges a district court to conduct an evidentiary hearing on a
motion to suppress if two requirements are met: (1) the defendant "makes
a substantial preliminary showing that a false statement knowingly and
intentionally, or with reckless disregard for the truth, was included by the
affiant in the warrant affidavit," and (2) "the allegedly false statement is
necessary to the finding of probable cause." Id. at 155-56.
6                    UNITED STATES v. BLATSTEIN
August 25, 2005, the district court issued an Order denying
Blatstein’s motion to suppress and request for a Franks hearing. Then,
on October 5, 2005, Blatstein entered a conditional guilty plea to one
count of mail fraud in contravention of 18 U.S.C. § 1341, reserving
his right to appeal the court’s denial of his suppression motion. See
Fed. R. Crim. P. 11(a)(2) (authorizing conditional guilty pleas). The
plea agreement between Blatstein and the prosecution provided that
they would jointly recommend a sentence at the low end of
Blatstein’s 24-30 month guidelines range.

   On January 6, 2006, the probation officer submitted to the district
court his presentence report concerning Blatstein (the "PSR"). The
PSR advised that there were no factors that would warrant a sentence
outside Blatstein’s advisory guidelines range. Subsequently, on Feb-
ruary 3, 2006, Blatstein filed a sentencing memorandum. This memo-
randum addressed Blatstein’s efforts to make restitution, as well as
the harm to his livelihood and health that had resulted from his mis-
conduct and prosecution. Attached to Blatstein’s sentencing memo-
randum were letters from several friends and family members,
including his mother and brother, expressing their concern over
Blatstein’s situation. Significantly, Blatstein’s memorandum did not
suggest that any of his circumstances called for a sentence outside his
advisory guidelines range. To the contrary, the memorandum
explained that the parties had agreed to recommend a sentence of 24
months, within the guidelines range.

   On February 8, 2006, the district court conducted Blatstein’s sen-
tencing hearing. Pursuant to the plea agreement, the parties recom-
mended that Blatstein be sentenced to 24 months’ imprisonment, the
bottom of his guidelines range. The court, however, varied down-
ward, sentencing Blatstein to a prison term of 12 months and one day
— despite having failed to notify the parties of a possible downward
variance, as required by Federal Rule of Criminal Procedure 32(h). In
imposing Blatstein’s sentence, the court listed several reasons that it
would be "counter productive to incarcerate him for two years":
Blatstein’s "early efforts to make amends for his wrong doing"; the
effect of his offense on his health and profession; "his family"; and
the fact that a shorter prison term would "save the United States
$25,000 plus that would be wasted by warehousing him for that
period of time." J.A. 200.
                       UNITED STATES v. BLATSTEIN                         7
  The prosecution, on the record, noted its objection that Blatstein’s
below-guidelines sentence was inconsistent with the factors spelled
out in § 3553(a). The prosecution did not object, however, to the
court’s failure to give notice that it intended to vary from Blatstein’s
guidelines range.

   Blatstein has appealed from the denial of his motion to suppress,
and the Government has cross-appealed Blatstein’s sentence. We pos-
sess jurisdiction under 28 U.S.C. § 1291.

                                    II.

   In an appeal of a district court’s ruling on a motion to suppress evi-
dence, we review the court’s legal conclusions de novo and its under-
lying factual findings for clear error. See United States v. Rusher, 966
F.2d 868, 873 (4th Cir. 1992). When an appellant raises a contention
of error that was not presented to the district court in the first instance,
we review it for plain error only. See Fed. R. Crim. P. 52(b); United
States v. Olano, 507 U.S. 725, 731-32 (1993). A party seeking to
overturn a ruling under the plain-error test bears the burden of show-
ing (1) that an error occurred, (2) that it was plain, and (3) that it
affected the party’s substantial rights. Olano, 507 U.S. at 732. The
correction of plain error lies within our discretion, which we "should
not exercise . . . unless the error seriously affects the fairness, integ-
rity or public reputation of judicial proceedings." Id. (internal quota-
tion marks and brackets omitted).

                                    III.

                                    A.

   Blatstein contends that the search warrants were invalid because
Agent Howard’s affidavit failed to discuss a Virginia statutory provi-
sion that would have negated the existence of probable cause for the
proposed searches. The Virginia statute on which Blatstein relies
authorizes a physician to perform surgery in his office without first
obtaining a hospital license, provided the physician’s office is not
principally used for performing surgery. Va. Code Ann. § 32.1-124
(2004). Blatstein maintains that Agent Howard was aware of this stat-
8                     UNITED STATES v. BLATSTEIN
utory provision, and that if Howard had included it in the affidavit,
the affidavit would not have properly supported the issuance of the
search warrants.

   We reject Blatstein’s contention in this regard, because Agent
Howard’s affidavit would have provided probable cause for the
search warrants even if it had specified and discussed the statutory
provision whose omission he contests. The question before the magis-
trate judge, in assessing Agent Howard’s warrant application, was
whether the affidavit furnished probable cause to believe that
Blatstein had committed health care fraud and mail fraud, as defined
in 18 U.S.C. §§ 1347 and 1341, and that searches of his office and
residence would yield evidence of such offenses. Pertinent to that
inquiry, the affidavit indicated that Blatstein had obtained payments
from health care benefit programs by falsely representing that CPASC
was a facility separate from his podiatry office, and that CPASC’s
patients were treated in specialized pre-operation, operating, and
recovery rooms. Moreover, the affidavit showed that Blatstein had
concealed from his patients the fact that he was billing their insurers
for surgical facilities purportedly provided by CPASC, and that he
had tricked patients into unwittingly signing forms indicating that
CPASC had provided them services. In addition, the affidavit advised
that Blatstein had used the United States mail to send false bills to
insurers and to receive payment for such bills. These assertions gave
the magistrate judge probable cause to believe that Blatstein had
engaged in health care fraud and mail fraud.

   In sum, the showing of probable cause in Agent Howard’s affidavit
was predicated on Blatstein’s billing practices, not on whether he was
legally permitted to perform surgery in his podiatry office. Accord-
ingly, even if the affidavit had included a Virginia statutory provision
under which Blatstein might lawfully have performed the surgeries
for which he billed, it would nonetheless have supplied probable
cause to believe that his billing itself was fraudulent. The district
court thus did not err in denying Blatstein’s motion to suppress and
his request for a Franks hearing. See Franks v. Delaware, 438 U.S.
154, 155-56 (1978) (no evidentiary hearing required unless "the alleg-
edly false statement is necessary to the finding of probable cause").3
    3
   Because Agent Howard’s affidavit would have provided probable
cause for the search warrants even if it had discussed the statutory provi-
                      UNITED STATES v. BLATSTEIN                        9
                                   B.

    In its cross-appeal, the Government contends that the sentencing
court erred in imposing a variance sentence without providing reason-
able notice of its intent to do so. The Government acknowledges that
it failed to object to this asserted error at Blatstein’s sentencing hear-
ing, and that we consequently must review the sentencing court’s pro-
cedure in this regard for plain error only. See Fed. R. Crim. P. 52(b);
United States v. Olano, 507 U.S. 725, 731-32 (1993).

   Federal Rule of Criminal Procedure Rule 32(i)(1)(C) obliges a sen-
tencing court to "allow the parties’ attorneys to comment on . . . mat-
ters relating to an appropriate sentence." In Burns v. United States,
501 U.S. 129 (1991), the Supreme Court held that, under this provi-
sion of Rule 32, a court may not depart on a ground not identified as
a ground for departure in either the presentence report or a prehearing
submission by the parties, unless the court provides the parties rea-
sonable notice that it is contemplating such a departure and informs
them of the departure’s basis. See id. at 138-39.4 In reaching this
result, the Court reasoned that "Rule 32’s purpose [is] promoting
focused, adversarial resolution of the legal and factual issues" critical
to sentencing, and that meaningful adversarial testing is impossible if
the parties lack adequate notice of the issues to be resolved. Id. at 137.
In 2002, the holding of Burns was codified as Rule 32(h). See Fed.
R. Crim. P. 32 advisory committee’s notes ("Rule 32(h) is a new pro-
vision that reflects Burns v. United States, 501 U.S. 129, 138-39
(1991).").5

sion on which Blatstein relies, we do not reach or address the question
of whether Agent Howard’s omission of that provision from the affidavit
was an intentional falsification or exhibited reckless disregard for the
truth.
   4
     At the time Burns was decided, the provision that is now Rule
32(i)(1)(C) was numbered Rule 32(a)(1). See Burns, 501 U.S. at 135.
   5
     Rule 32(h) provides as follows:
    Before the court may depart from the applicable sentencing
    range on a ground not identified for departure either in the pre-
    sentence report or in a party’s prehearing submission, the court
    must give the parties reasonable notice that it is contemplating
    such a departure. The notice must specify any ground on which
    the court is contemplating a departure.
10                   UNITED STATES v. BLATSTEIN
   Since the advent of variance sentences as a result of United States
v. Booker, 543 U.S. 220 (2005), the question has arisen whether
Burns and Rule 32(h) require notice of potential variances as well as
departures. Some of our sister circuits have answered this question in
the negative, deciding that variances are outside the scope of Burns
and Rule 32(h). See, e.g., United States v. Vampire Nation, 451 F.3d
189, 196-97 (3d Cir. 2006); United States v. Walker, 447 F.3d 999,
1007 (7th Cir. 2006); United States v. Irizarry, 458 F.3d 1208, 1212
(11th Cir. 2006); United States v. Long Soldier, 431 F.3d 1120, 1122
(8th Cir. 2005). We have taken the opposite view, concluding that
"notice of an intent to depart or vary from the guidelines remains a
critical part of sentencing post-Booker," because "[t]here is ‘essen-
tially no limit on the number of potential factors that may warrant a
departure’ or a variance, and neither the defendant nor the Govern-
ment ‘is in a position to guess when or on what grounds a district
court might depart’ or vary from the guidelines." United States v.
Davenport, 445 F.3d 366, 371 (4th Cir. 2006) (quoting Burns, 501
U.S. at 136-37); accord United States v. Anati, 457 F.3d 233, 236-37
(2d Cir. 2006); United States v. Evans-Martinez, 448 F.3d 1163, 1167
(9th Cir. 2006). Here, neither the PSR nor Blatstein’s sentencing
memorandum suggested that there existed a proper basis for a vari-
ance or departure. The sentencing court was thus obliged, pursuant to
Rule 32, to notify the parties of its intent to vary downward from
Blatstein’s advisory guidelines range.

   Blatstein contends, however, that the sentencing court’s failure to
give notice of its plan to vary downward was not error — or, if it was
error, it did not prejudice the Government — because most of the fac-
tors that the court cited in support of its downward variance were
mentioned in either the PSR or Blatstein’s sentencing memorandum.
But Burns and Rule 32(h) do not permit a court to impose a variance
sentence without notice merely because the basis for the variance is
mentioned somewhere in the presentence documents. Rather, Burns
requires reasonable notice of any variance imposed for a reason not
previously "identified as a ground" for a possible variance. Burns, 501
U.S. at 138. Moreover, Burns mandates that the parties be apprised
of the grounds on which a planned variance is premised, so that they
may subject the rationale for the variance to the adversarial testing
process contemplated by Rule 32 and the guidelines. See Burns, 501
U.S. at 137; Fed. R. Crim. P. 32(h) (requiring notice of contemplated
                     UNITED STATES v. BLATSTEIN                      11
departure "on a ground not identified for departure either in the pre-
sentence report or in a party’s prehearing submission" (emphasis
added)); see also United States v. Spring, 305 F.3d 276, 282-83 (4th
Cir. 2002) (Rule 32’s requirement of opportunity to comment not sat-
isfied even though court’s ground for departure was identified in PSR,
where PSR listed several possible grounds for departure and court
failed to notify parties of planned departure or bases thereof). The
sentencing court here failed to give such notice, and it thereby erred.

   In Spring, we decided that a sentencing court’s failure to give
notice of a planned departure, as required by Rule 32, constitutes
plain error, and that it satisfies the substantial rights prong of Olano
plain-error review. See 305 F.3d at 282. Although Spring involved an
upward departure that affected the substantial rights of a defendant,
we have recognized that the substantial rights of the Government are
similarly entitled to protection from plain error. See United States v.
Perkins, 108 F.3d 512, 517 (4th Cir. 1997). Accordingly, we are con-
strained to conclude that the court’s Rule 32 error was plain and
affected the Government’s substantial rights.

   Spring also recognized that an unpreserved Rule 32 notice error
should be corrected on appeal if the party opposing the departure
raises contentions that, if developed in response to reasonable notice,
might have dissuaded the sentencing court from departing. See 305
F.3d at 282-83; accord United States v. Evans-Martinez, 448 F.3d
1163, 1167 (9th Cir. 2006). Here, it appears that the Government,
given a fair opportunity to prepare, could have raised meritorious
objections to the grounds on which the court varied. Notably, the
Government has presented forceful challenges to several of the fac-
tors on which the court relied in varying downward, including
Blatstein’s "early efforts to make amends for his wrong doing," the
impact that his conduct had on his profession and his family, and the
possible savings to the federal government from shortening
Blatstein’s prison time. Because the parties were not on notice that the
court planned to vary downward on these grounds, the variance was
not subjected to meaningful adversarial testing. Consequently, Burns
and Spring, our controlling precedents, oblige us to correct the sen-
tencing court’s plain error under Rule 32.6
  6
   Because we vacate Blatstein’s sentence on account of the sentencing
court’s Rule 32 error, we need not address the Government’s alternative
contention that the sentence was unreasonable.
12                   UNITED STATES v. BLATSTEIN
                                 IV.

   For the foregoing reasons, we affirm the district court’s ruling on
the suppression motion. We vacate Blatstein’s sentence and remand
for resentencing proceedings consistent with Rule 32.

                                   AFFIRMED IN PART, VACATED
                                      IN PART, AND REMANDED