U.S. v. Zats, 00-2757.

• Decision Date: 05 August 2002
• Docket Number: No. 00-2757.,00-2757.
• Citation: 298 F.3d 182
• Parties: UNITED STATES of America v. Steven B. ZATS, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

298 F.3d 182

UNITED STATES of America v. Steven B. ZATS, Appellant.

No. 00-2757.

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit LAR 34.1(a) December 6, 2001.

Filed: August 5, 2002.

Michael D. Shepard, Blank, Rome, Comisky & McCauley LLP, Philadelphia, PA, Counsel for Appellant.

Michael L. Levy, United States Attorney, Walter S. Batty Jr., Assistant United States Attorney, Senior Litigation Counsel, Robert A. Zauzmer, Assistant United States Attorney, Chief of Appeals, Philadelphia, PA, Counsel for Appellee.

Before: ALITO, AMBRO and GREENBERG, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

Steven Zats used his debt collection practice to defraud creditors who hired him. After he was caught, he pled guilty to several federal offenses. In this appeal, Zats contends that the District Court erred by enhancing his sentence pursuant to § 3A1.1(b) of the United States Sentencing Guidelines ("U.S.S.G."), better known as the vulnerable victim enhancement. We affirm.

I. Factual and Procedural History

Zats was an attorney who specialized in collecting small debts, usually hundreds of dollars. Many of his clients were doctors whose patients owed money on their medical bills. These patients were frequently poor, facing desperate personal circumstances, and ignorant of their legal rights. Nonetheless, Zats collected debts by harassing debtors and ignoring the requirements of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. If a debtor would not pay a debt voluntarily, Zats would file a lawsuit, obtain a judgment (typically by default), and execute on it against the debtor's bank account.¹ But when Zats could not locate a bank account, he often engaged in a phone "survey" in which he called the debtor, offered him or her a free gift for completing his survey, and then asked questions until he obtained enough information to identify the account. When Zats succeeded in collecting debts, he routinely failed to forward to his clients the full amount of the funds to which they were entitled.

Two examples illustrate Zats' practices. Edmond Jefferson had a disputed $6,000 debt with the physician treating his terminally ill wife. The physician explicitly instructed Zats not to pursue the money, but Zats nonetheless seized $6,000 from Jefferson's account. Jefferson called Zats to beg for the money. He explained that his wife was dying, his son had recently died, and he had no money to pay for food or funeral expenses. Zats laughed at him, kept the money, and never turned it over to the doctor.

Sylvia Micozzi was two days late on a payment to her dentist for a procedure that she said she never authorized. Zats filed a judgment, used his phone "survey" to trick her into divulging the location of her bank account, and then froze the account. When she called to explain that her husband was sick and that she could not afford the payment, Zats informed her that he "had high hopes that she had life insurance on her husband." Distraught, she agreed to make the payment.

Zats' failure to turn over his clients' funds eventually resulted in his arrest. He pled guilty to conspiracy to commit mail fraud, wire fraud, and a tax offense, all in violation of 18 U.S.C. § 371, as well as to attempted tax evasion in violation of 26 U.S.C. § 7201. At sentencing, the District Court heard arguments on whether to add a vulnerable victim enhancement to Zats' sentence. The Government argued that many of the debtors from whom Zats collected were vulnerable, even though the most direct victims of his crime, the creditors, may not have been. The Court agreed and enhanced Zats' sentence two levels pursuant to U.S.S.G. § 3A1.1(b). He appealed.²

II. Standard of Review

We exercise plenary review over the District Court's legal interpretation of the Sentencing Guidelines. United States v. Monostra, 125 F.3d 183, 188 (3d Cir. 1997). However, "factual findings concerning the vulnerable victim adjustment are reversible only for clear error." United States v. Iannone, 184 F.3d 214, 220 (3d Cir.1999).

We have generally assumed that our standard of review for the application of the Guidelines to facts is plenary, see, e.g., United States v. Jarvis, 258 F.3d 235, 241 (3d Cir.2001), but the Supreme Court's recent decision in Buford v. United States, 532 U.S. 59, 121 S.Ct. 1276, 149 L.Ed.2d 197 (2001), prompts us to modify this position. According to 18 U.S.C. § 3742, the courts of appeals "shall give due deference to the district court's application of the guidelines to the facts." Buford involved a bank robber who received a career offender enhancement to her sentence under § 4B1.1 of the Guidelines because the District Court decided to treat her five prior convictions as separate crimes rather than consolidate them into a single conviction. Buford, 532 U.S. at 61-62, 121 S.Ct. 1276. The Seventh Circuit agreed that the prior convictions were separate under a clear error standard of review, United States v. Buford, 201 F.3d 937, 940-42 (7th Cir. 2000), and the Supreme Court affirmed. Buford, 532 U.S. at 60, 121 S.Ct. 1276. Based on its reading of § 3742, the Supreme Court held that appellate courts should review "deferentially" trial court determinations about whether previous criminal cases were consolidated under the Guidelines. Buford, 532 U.S. at 64, 121 S.Ct. 1276. Buford did not define deferential review, but we conclude, as the Seventh Circuit did, see 201 F.3d at 941, that it means clear error review in this context. Although guided by legal principles, sentencing judges conduct a factual inquiry when determining whether a victim is particularly vulnerable. The alternative understanding of deferential would be abuse of discretion, but that standard does not fit as well here. The question is not whether the District Court abused its discretion in choosing among different courses of action. Instead, it is whether the Court perceived the facts correctly.

The reasons for applying deferential review in Buford apply here as well. As in Buford, the question of whether a victim is particularly vulnerable is one in which "factual nuance may closely guide the legal decision, with legal results depending heavily upon an understanding of the significance of case-specific details." 532 U.S. at 65, 121 S.Ct. 1276. Thus, while we exercise plenary review over the legal question of who can be a victim for purposes of the vulnerable victim enhancement, we review deferentially (i.e., for clear error) the District Court's determination that Zats' victims were particularly vulnerable.

III. Discussion

We affirm Zats' sentence because he satisfies the standard in U.S.S.G. § 3A1.1(b)(1) and the accompanying application note.³ Section 3A1.1(b)(1) states "If the defendant knew or should have known that a victim of the offense was a vulnerable victim, increase by 2 levels."

We employ a three-part test to determine whether a vulnerable victim enhancement is appropriate:

The enhancement may be applied where: (1) the victim was particularly susceptible or vulnerable to the criminal conduct; (2) the defendant knew or should have known of this susceptibility or vulnerability; and (3) this vulnerability or susceptibility facilitated the defendant's crime in some manner; that is, there was `a nexus between the victim's vulnerability and the crime's ultimate success.'

Iannone, 184 F.3d at 220 (quoting Monostra, 125 F.3d at 190).

Zats offers several reasons why the enhancement should not apply to him. None is persuasive. At the outset, we note that Zats does not challenge the Government's facts; indeed, he stipulated to them. He challenges only the District Court's interpretation and application of the vulnerable victim enhancement.

A. Victim status

Zats' first argument is that the "victims" to which the vulnerable victim enhancement refers must be the victims of the offense of conviction. He contends that because he pled guilty only to defrauding his clients, who were not vulnerable, the enhancement cannot apply.

The cases on this issue and the language of the Sentencing Guidelines refute Zats' argument. The application note for U.S.S.G. § 3A1.1(b) states in relevant part:

For purposes of subsection (b), "vulnerable victim" means a person (A) who is a victim of the offense of conviction and any conduct for which the defendant is accountable under § 1B1.3 (Relevant Conduct)....

U.S.S.G. § 3A1.1, cmt. n. 2 (emphasis added). The application note thus refers not only to conduct involved in the offense of conviction, but also to any relevant conduct under § 1B1.3. Section 1B1.3(a) includes the following as relevant conduct:

(1)(A) all acts and omissions committed, aided, abetted, counseled, commanded, induced, procured, or willfully caused by the defendant; and

....

(3) all harm that resulted from the acts and omissions specified in subsections (a)(1) and (a)(2) above, and all harm that was the object of such acts and omissions....

U.S.S.G. § 1B1.3(a). In United States v. Cruz, 106 F.3d 1134 (3d Cir.1997), we found that "neither § 3A1.1(b) nor the application note explicitly requires that we read `victim' narrowly and that, under § 1B1.3, we may look at all the conduct underlying the offense of conviction." Id. at 1137 (emphasis added). We then applied the enhancement where the defendant sexually assaulted a twelve-year-old victim in the process of stealing a car and later pled guilty only to carjacking. Id. Likewise, in Monostra, we said that "the drafters of the Sentencing Guidelines did not intend to limit the application of § 3A1.1(b) to situations in which the vulnerable person was the victim of the offense of conviction. Rather, trial courts may look to all the conduct underlying an offense, using § 1B1.3 as a guide." 125 F.3d at 189. We held that the enhancement could apply where the defendant bilked a small business in the course of defrauding a bank. Id. In addition, other courts of appeals have applied the...