U.S. v. Rostoff

• Decision Date: 07 October 1998
• Docket Number: No. 97-1940,97-1940
• Citation: 164 F.3d 63
• Parties: UNITED STATES of America, Plaintiff, Appellee, v. Steven M. ROSTOFF and David R. Rostoff, Defendants, Appellants. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 63

164 F.3d 63

UNITED STATES of America, Plaintiff, Appellee, v. Steven M. ROSTOFF and David R. Rostoff, Defendants, Appellants.

No. 97-1940.

United States Court of Appeals First Circuit.

Heard Oct. 7, 1998.

Decided Jan. 7, 1999.

Michael J. Traft with whom Carney & Bassil was on brief for appellants.

Christopher Alberto, Assistant United States Attorney, with whom Donald K. Stern, United States Attorney, was on brief for appellee.

Before TORRUELLA, Chief Judge, CYR, Senior Circuit Judge, and STAHL, Circuit Judge.

STAHL, Circuit Judge.

Defendants-appellants Steven and David Rostoff (the "Rostoffs") appeal the government's successful use of the Federal Debt Collection Procedures Act ("FDCPA"), codified at 28 U.S.C. § 3001 et seq., to obtain a civil judgment in the amount of the Rostoffs' outstanding obligations under an order of restitution previously issued pursuant to a provision of the Victim Witness Protection Act ("VWPA"), 18 U.S.C. § 3663. We affirm in part and vacate and remand to the district court for further proceedings.

I. Background

Together with separately sentenced co-conspirator James Harris, the Rostoffs fraudulently induced the Bank for Savings, a federally insured financial institution, to grant ill-advised loans totaling over $30 million to investors in the Rostoffs' real estate schemes. ¹ Collection efforts on these loans apparently soured after the crash of the New England real estate market. Investigation of the bank's subsequent failure uncovered the brothers' wrongdoing, and the United States prosecuted the Rostoffs for bank fraud, false statements, and conspiracy. After conviction, the district court imposed on each Rostoff a sentence that included a prison term, two years of supervised release, and an order of restitution to the FDIC as successor-in-interest to the failed bank. The order was not specific as to amount. Rather, it provided only that total restitution was "not to exceed $650,000." The order also required the Rostoffs to pay in installments as determined by the probation department.

During supervised release, the Rostoffs paid very little of their restitution obligation--David paid $8,200 and Steven paid $7,463.21. David Rostoff did, however, actively and successfully work to restructure and refinance two assets in which he had certain partnership interests: the Tanglewood Apartments and the Hickory Ridge Apartments. Steven Rostoff had an interest only in the Tanglewood complex. As part of the refinancing scheme, the Rostoffs transferred their respective interests in these assets to the wife of David Rostoff and that of their co-conspirator Harris. In violation of the terms of their supervised release, these transfers were not reported to the probation office until near the very end of the period. Indeed, the Rostoffs made several false representations to their respective probation officers regarding the state of their interests in the assets, and they never reported the identities of the recipients of the transfers. Furthermore, David Rostoff actively concealed contacts with co-conspirator Harris that he was also required to report; at these forbidden contacts, the two planned and executed the refinancing scheme.

Two weeks before the end of supervised release, which terminated on March 31, 1996, the United States initiated separate civil actions against each brother. The government essentially sought a declaration that the Rostoffs' restitution debt was outstanding and enforceable. The two cases were consolidated into the action now under review.

The Rostoffs initially sought to have the civil action dismissed on the ground that the restitution order expired, as a matter of law, at the termination of their respective periods of supervised release. The district court denied this motion, holding that the statutory language on which the Rostoffs relied limited only "the time period during which the [sentencing] court ... can require a defendant to make restitution payments, [and] not the time period during which a civil suit by a victim to enforce the restitution order may be prosecuted." United States v. Rostoff, 956 F.Supp. 38, 42 (D.Mass.1997). The United States and the Rostoffs then filed cross-motions for summary judgment. The district court denied the Rostoffs' motion, again rejecting the contention that the restitution orders had expired as a matter of law, and also rejecting constitutional claims under the Fifth and Seventh Amendments "out of hand." Id. at 44 n. 9. The district court granted the government's motion in part, ruling that the Rostoffs were liable for the unpaid balance of the restitution orders. However, based on remarks made by the sentencing court suggesting that restitution would be remitted at the end of the period of supervised release if the Rostoffs had no ability to pay, and on the indeterminate "up to $650,000" language of the order itself, the district court decided to hold a trial to determine the amount of restitution owed. The primary issue at trial was the Rostoffs' ability to have paid the restitution order during the supervised release period. After the four-day trial, the court initially entered judgment against each brother for the unpaid balance of the $650,000 restitution order, plus a ten percent surcharge pursuant to 28 U.S.C. § 3011(a). After reconsidering the question of Steven Rostoff's ability to have paid the entire balance, the court subsequently reduced the judgment against him to $159,000. The judgment against David Rostoff remained unchanged. The Rostoffs then filed this appeal. ²

On appeal, the Rostoffs assert multiple claims of error. First, they again contend that the order of restitution expired at the end of the period of supervised release and that they may not be held liable for its unpaid balance. Second, they claim that the government may not use the FDCPA to collect the restitution debt. Finally, they assert violations of their constitutional rights, clear error in the assessment of their abilities to pay the restitution, and lack of authorization for the assessment of the § 3011(a) surcharge. We address these issues seriatim.

II. The Enforceability of the Restitution Order

Relying on the language of 18 U.S.C. § 3663(f)(2) and on the decisions of several of our sister circuits, the Rostoffs contend that the order of restitution terminated at the end of their period of supervised release and is therefore uncollectible. Their reliance is misplaced and we affirm the decision of the district court.

The disputed portion of the applicable version ³ of 18 U.S.C. § 3663(f) states:

(1) The court may require that such defendant make restitution under this section within a specified period or in specified installments.

(2) The end of such period or the last such installment shall not be later than-

(A) the end of the period of probation, if probation is ordered;

....

(3) If not otherwise provided by the court under this subsection, restitution shall be made immediately.

18 U.S.C. § 3663(f) (1994). Because this dispute is purely a matter of statutory interpretation, we review the district court's ruling de novo. See United States v. De Luca, 137 F.3d 24, 39 (1st Cir.1998), cert. denied, --- U.S. ----, 119 S.Ct. 174, 142 L.Ed.2d 142 (1998).

We agree with the district court that subsection (f) controls the authority of the sentencing court. The subsection contains no provisions regarding the enforcement powers of the district court in this case. It simply authorizes the sentencing court to impose an order of restitution. In the normal case, payment of restitution is due immediately. See 18 U.S.C. § 3663(f)(3). In its discretion, the sentencing court may elect to make restitution due in installments, or at the end of a specified period. See 18 U.S.C. § 3663(f)(1). The sentencing court's discretion in this regard is constrained: payment must fall due by the end of the period of supervised release. See 18 U.S.C. § 3663(f)(2).

The Rostoffs argue that 18 U.S.C. § 3663(f)(2) governs the time in which the restitution order may be enforced. Under their view, the unpaid restitution obligation was not delinquent at the end of the period of supervised release. Rather, it ceased to exist.

We do not agree. The fact that the last payment of restitution is due at the end of supervised release has nothing to do with the duration or expiration of the restitution order. See United States v. House, 808 F.2d 508, 511 (7th Cir.1986); United States v. Keith, 754 F.2d 1388, 1393 (9th Cir.1985). Common sense dictates that failure to pay at the time due renders payment overdue; it does not abate the obligation entirely. See United States v. Soderling, 970 F.2d 529, 535 & n. 12 (9th Cir.1992) (noting that a restitution order is "extinguished only by satisfaction, not by the passage of time"). The Second Circuit has recently recognized, for example, that restitution orders under the VWPA can be enforced for twenty years, where the defendant fails to make the payments due in the payment period. See United States v. Berardini, 112 F.3d 606, 611 (2d Cir.1997). This reasoning reflects the approach, endorsed by the Seventh and Ninth Circuits, that the VWPA should be read to protect victims and not defendants. See House, 808 F.2d at 508; Keith, 754 F.2d at 1388; see also 1982 U.S.C.C.A.N. 2515, 2515 ("The purpose of [the VWPA] is to strengthen existing legal protections for victims and witnesses of Federal crimes.") (emphasis added); id. at 2537 (uncertainties in damages determinations should be resolved with "a view toward achieving fairness to the victim ")(emphasis added). ⁴

Viewing subsection (f) in the context of the whole of § 3663 confirms this view. See Kelly v. Robinson, 479 U.S. 36, 43, 107 S.Ct. 353, 93 L.Ed.2d 216 (1986) ("In expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law and to its object and policy."). Enforcement of the...