U.S. v. Farr, 04-3502.

• Decision Date: 17 August 2005
• Docket Number: No. 04-3502.,04-3502.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. James E. FARR, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

419 F.3d 621

UNITED STATES of America, Plaintiff-Appellee, v. James E. FARR, Defendant-Appellant.

No. 04-3502.

United States Court of Appeals, Seventh Circuit.

Argued April 8, 2005.

Decided August 17, 2005.

Gail Joy Hoffman (argued), Office of the United States Attorney, Milwaukee, WI, for Plaintiff-Appellee.

Michael J. Steinle (argued), Milwaukee, WI, for Defendant-Appellant.

Before FLAUM, Chief Judge, and BAUER and WOOD, Circuit Judges.

FLAUM, Chief Judge.

Defendant-appellant James Farr was convicted of bank fraud and related offenses, for which the district court sentenced him to twenty-seven months of incarceration and five years of supervised release. After Farr served his prison term and was released, the district court ordered him to pay $208,169.44 in restitution as a condition of his supervised release. Upon Farr's appeal, and for the reasons stated herein, we vacate the district court's order of restitution.

I. Background

On February 9, 2001, a jury convicted Farr of one count of bank fraud, one count of interstate transmission of stolen funds, and two counts of engaging in unlawful financial transactions. See 18 U.S.C. §§ 1344, 2314, 1957. In anticipation of sentencing, the United States Probation Office prepared a presentence report ("PSR") which stated that "restitution in the amount of $208,168.44 is outstanding," but explained that the probation office was still in the process of contacting victims to request financial affidavits. At the sentencing hearing, the probation officer said that she was having some difficulty getting declarations of losses from the victims but promised to provide an amended PSR stating the exact amounts of the victims' losses. The court responded that the parties could return later if there was a dispute about the amount of restitution that should be ordered. On July 16, 2001, the court entered judgment, sentencing Farr to twenty-seven months of imprisonment and five years of supervised release. The judgment stated that restitution was "to be determined" and that the "determination of restitution is deferred to unknown [sic]." Farr went to prison and we affirmed his conviction. See United States v. Farr, 297 F.3d 651 (7th Cir.2002).

On August 21, 2003, Farr was released from custody and began serving his term of supervised release. Around this time, the probation office discovered that restitution had never been ordered. The government originally had intended to seek restitution under the Mandatory Victims Restitution Act ("MVRA"), 18 U.S.C. § 3663A, which requires courts to order restitution to the victims of certain specified offenses, including bank fraud. See §§ 3663A(a)(1), (c)(1). A district court generally may not order restitution under the MVRA, however, unless it does so within ninety days of sentencing. See § 3664(d)(5). Because more than three years had passed since Farr was sentenced, the government asked the court to order restitution as a condition of supervised release rather than under the MVRA. Farr argued that the ninety-day time limit in § 3664(d)(5) applies to restitution orders entered as a condition of supervised release as well as those issued pursuant to the MVRA. The district court disagreed with Farr and, on September 13, 2004, ordered him to pay $208,169.44 in restitution as a condition of supervised release. Farr appeals the restitution order.

II. Discussion

Farr contends that the district court exceeded its statutory authority in ordering restitution as a condition of supervised release more than ninety days after sentencing. We review de novo questions of law regarding the statutory authority of the federal courts to order restitution. United States v. Donaby, 349 F.3d 1046, 1048-49 (7th Cir.2003). Because "federal courts possess no inherent authority to order restitution, and may do so only as explicitly empowered by statute," we begin our analysis with the statute itself. Id. at 1052 (internal quotations omitted). By following a series of statutory cross-references, we are led to the conclusion that the district court exceeded its authority in ordering restitution in this case.

The district court issued its restitution order pursuant to 18 U.S.C. § 3583(d), which provides that a court may order as a condition of supervised release "any condition set forth as a discretionary condition of probation in section 3563(b)(1) through (b)(10) and (b)(12) through (b)(20), and any other condition it considers to be appropriate." The district court selected from this list § 3563(b)(2)'s authorization of orders to "make restitution to a victim of the offense under section 3556 (but not subject to the limitation of section 3663(a) or 3663A(c)(1)(A))." Thus, the court was authorized to order restitution as a condition of supervised release under § 3556, which states that "[t]he procedures under section 3664 shall apply to all orders of restitution under this section." The mandatory "shall" of § 3556 indicates that, in ordering restitution as a condition of supervised release, the court was required to follow the procedures set forth in § 3664. Section 3664 provides in part:

If the victim's losses are not ascertainable by the date that is 10 days prior to sentencing, the attorney for the Government or the probation officer shall so inform the court, and the court shall set a date for the final determination of the victim's losses, not to exceed 90 days after sentencing. If the victim subsequently discovers further losses, the victim shall have 60 days after discovery of those losses in which to petition the court for an amended restitution order. Such order may be granted only upon a showing of good cause for the failure to include such losses in the initial claim for restitutionary relief.

§ 3664(d)(5) (emphasis added).

At the end of this series of steps, we see that a court relying on §§ 3583(d) and 3563(b)(2), as the district court did in this case, may order restitution as a condition of supervised release no later than ninety days after sentencing, unless a victim petitions the court within sixty days of the discovery of its losses and can show good cause for the delay. Here, it is undisputed that no victim petitioned the district court and there was no good cause for the delay. Accordingly, the district court did not have authority to order Farr to pay restitution as a condition of supervised release when it did so more than three years after sentencing him.

In an effort to avoid this result, the government cites several cases from this and other circuits, none of which provide support for affirming the district court's order in this case. In United States v. Brooks, 114 F.3d 106 (7th Cir.1997), and United States v. Daddato, 996 F.2d 903 (7th Cir.1993), the district courts ordered repayment of drug "buy money" as a condition of supervised release under § 3583(d)'s catch-all provision. See § 3583(d) ("[t]he court may order, as a[ ] condition of supervised release . . . any condition set forth as a discretionary condition of probation in section 3563(b)(1) through (b)(10) and (b)(12) through (b)(20), and any other condition it considers to be appropriate.") (emphasis added). In affirming, we explained that while a court may not order repayment of the government's investigative costs as restitution because the government is not a victim of the crime, a district court is authorized by the catch-all provision to order such repayment as a condition of supervised release. See Daddato, 996 F.2d at 905-06; Brooks, 114 F.3d at 108; see also United States v. Cook, 406 F.3d 485, 489 (7th Cir.2005) (repayment of "buy money" may be ordered as a condition of supervised release but not as restitution). Because the district courts in Daddato and Brooks did not, and could not have, invoked § 3563(b)(2), we were not led through the series of cross-references to the ninety-day time limit in § 3664(d)(5). These cases say nothing about ordering restitution as a condition of supervised release or the procedures that courts must follow in doing so. Furthermore, the district court in this case did not rely on § 3583(d)'s catch-all provision, and the government does not argue that this provision authorized the court's order. Therefore, Brooks and Daddato provide no guidance as to whether the district court exceeded its authority in this case.

The government also cites United States v. Dahlstrom, 180 F.3d 677 (5th Cir.1999), and United States v. Bok, 156 F.3d 157 (2d Cir.1998), for the proposition that where restitution cannot be imposed pursuant to the MVRA or the Victim and Witness Protection Act ("VWPA"),¹ a court may be able to order restitution as a condition of supervised release. Although this is true, it does not further the government's position in this case. As we explained above, § 3583(d) read in conjunction with § 3563(b)(2) authorizes a district court to order restitution as a condition of supervised release. Section 3563(b)(2) specifically provides that such orders are not subject to the limitations of § 3663(a) of the VWPA. Consistent with the plain language of these provisions, Dahlstrom and Bok held that restitution could be ordered as a condition of supervised release despite limitations in § 3663(a) that precluded the district courts from ordering restitution under the VWPA. By contrast, the government contends in this case that an order of restitution need not comply with § 3664(d)(5)'s ninety-day limit. Not only is § 3664 not excepted from § 3563(b)(2), as is § 3663(a), but courts are expressly directed to comply with the procedures set forth in § 3664. See § 3556 ("[t]he procedures under section 3664 shall apply to all orders of restitution under this section."). Thus, Dahlstrom and Bok do not advance the government's position here.

Next, the government points to United States v. Grimes, 173 F.3d 634 (7th Cir.1999), and United States v. Zakhary, 357 F.3d 186 (2d Cir.2004). In Grimes, we were faced with a restitution order that...