United States v. Courtney

• Decision Date: 11 March 2016
• Docket Number: No. 15–2015.,15–2015.
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Keith Michael COURTNEY, Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

816 F.3d 681

UNITED STATES of America, Plaintiff–Appellee,

v.Keith Michael COURTNEY, Defendant–Appellant.

No. 15–2015.

United States Court of Appeals, Tenth Circuit.

March 11, 2016.

Madeline Cohen, Assistant Federal Public Defender (and Virginia L. Grady, Federal Public Defender, with her on the briefs), Denver, CO, for Defendant–Appellant.

James R.W. Braun, Assistant United States Attorney (and Damon P. Martinez, United States Attorney, with him on the brief), Albuquerque, NM, for Plaintiff–Appellee.

Before KELLY, BRISCOE, and HARTZ, Circuit Judges.

KELLY

, Circuit Judge.

Defendant–Appellant Keith Courtney was convicted, after a jury trial, of three counts of wire fraud under 18 U.S.C. § 1343

. He was sentenced to 24 months' imprisonment followed by three years' supervised release and ordered to forfeit $1,601,825.84, the full value of the fraudulent wire transfers at issue in the underlying case. In addition, the court imposed $493,230.88 in restitution. On appeal, Mr. Courtney argues that (1) the forfeiture order must be reduced by the amount the lenders received from the properties through mortgage payments and the sale of the properties, and (2) he should have been allowed to inform the jury of the possible sentence and its power to acquit him if they believed the conviction would be unjust. Our jurisdiction arises under 28 U.S.C. § 1291 and 18 U.S.C. § 3742(a), and we reverse on the first argument and affirm on the second.

Background

Mr. Courtney, owner of Black Diamond Construction Co., obtained construction loans for two luxury homes but was unable to find buyers when the homes were completed. Without buyers, Mr. Courtney could not continue work on his other projects.

Justin Johns, a mortgage broker with an affiliated company, suggested he and Mr. Courtney reach out to straw buyers with good credit ratings and ask to use their identities to purchase the luxury homes. In exchange for the use of the straw buyers' identities, Mr. Courtney promised to make all of the mortgage payments until the homes resold and give the borrowers various credits valued at $5,000. The loan documents falsely stated that the borrowers intended to live in the homes. As might be expected, this plan ultimately failed; Mr. Courtney was unable to make the mortgage payments and the homes were eventually sold for a loss. Mr. Johns pled guilty and testified against Mr. Courtney. Mr. Courtney, together with Mr. Johns, caused a total of $1,601,825.84 in fraudulent mortgage wire transfers which resulted in an actual loss of $772,265.17 to the lending institutions.

The primary issue in this appeal is the forfeiture judgment entered by the district court against Mr. Courtney. In the initial indictment, the government notified Mr. Courtney it would seek forfeiture for each of his three counts of wire fraud under 18 U.S.C. § 981(a)(1)(C)

and 28 U.S.C. § 2461. When determining the forfeiture amount, the government and Mr. Courtney agreed that the court should use the definition of "proceeds" found in 18 U.S.C. § 981(a)(2)(A). The parties disagreed on how "proceeds" should be interpreted and the court ultimately determined Mr. Courtney was required to forfeit the entire amount of the fraudulent mortgage wire transfers.

On appeal, both parties' positions have shifted. The government urges us to apply 21 U.S.C. § 853

, which defines "proceeds" in a manner that would support the amount in the district court's forfeiture order. Mr. Courtney argues that the court must apply 18 U.S.C. § 981(a)(2)(C) pursuant to the statutory scheme under which he was indicted and calculate "proceeds" as the actual loss incurred by the lenders.

Discussion

A. Waiver

The government correctly contends, and Mr. Courtney's counsel agreed at oral argument, that the plain error standard applies because Mr. Courtney did not argue § 981(a)(2)(C)

limits the forfeiture order before the district court. Fed.R.Crim.P. 52(b) ; United States v. Olano, 507 U.S. 725, 732–36, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993). On appeal, the government urges us to find that Mr. Courtney has waived this claim because his opening brief mistakenly recited that our review should be de novo. Mr. Courtney did not address plain error until his reply brief.

The government relies upon Richison v. Ernest Group, Inc., 634 F.3d 1123, 1128–31 (10th Cir.2011)

, in which we rejected an argument that plain error should not apply to forfeited claims that were purely legal and required no new fact finding. After the holding, we stated:

Before us, however, Mr. Richison hasn't even attempted to show how his new legal theory satisfies the plain error standard. And the failure to do so—the failure to argue for plain error and its application on appeal—surely marks the end of the road for an argument for reversal not first presented to the district court.

Id. at 1130–31

. We think that Richison is readily distinguishable.

First, Richison is a civil case. We recognize that in all cases, the "burden of establishing plain error lies with the appellant," however this burden is "extraordinary and nearly insurmountable" in civil cases. Somerlott v. Cherokee Nation Distribs., Inc., 686 F.3d 1144, 1151 (10th Cir.2012)

(internal quotation marks and alterations omitted). Due to the interests at stake in a criminal case, the burden tends to be somewhat less. See Johnson v. United States, 520 U.S. 461, 465–66, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997) (noting that the plain error standard in the criminal context is somewhat "mitigated" by Fed.R.Crim.P. 52(b) ). Recognizing that the application of Rule 52(b) is a matter of sound discretion, Olano, 507 U.S. at 732, 113 S.Ct. 1770, we seriously doubt that Richison should be interpreted to supply a hard and fast rule displacing that discretion in direct criminal appeals.

Second, in Richison, Mr. Richison did not "even attempt" to address plain error. 634 F.3d at 1125

. Conversely, in the present case, the government made its plain error argument in its response brief and Mr. Courtney argued plain error fully in his reply brief. We have asked, "at what point on appeal must an appellant argue for plain error and its application?" but have yet to provide an answer. United States v. MacKay, 715 F.3d 807, 831 (10th Cir.2013). We need not decide that issue today other than to state that Mr. Courtney's failure to argue plain error in his opening brief appears to be a product of mistake (more akin to a forfeiture, not a waiver) that was promptly corrected in the reply brief. We also note that the government did not seek leave to file a sur-reply in response. Accordingly, when an error is obvious enough and satisfies Rule 52(b), an appellate court, in its discretion, may recognize the error notwithstanding briefing deficiencies. See United States v. Zander, 794 F.3d 1220, 1232 n. 5 (10th Cir.2015) ; MacKay, 715 F.3d at 831 n. 17 ("An appellant certainly would benefit from a more developed argument if he acknowledged forfeiture in his opening brief, but we do not discount the possibility that we may consider a plain error argument made for the first time in an appellant's reply brief."); United States v. Annabi, 746 F.3d 83, 86 (2d Cir.2014).

Of course, counsel always has a responsibility to identify where the precise issue raised on appeal was raised below and ruled upon. 10th Cir. R. 28.2(C)(2)

. That, in itself, may identify the need for a plain error discussion. Nor do we discount the rule that ordinarily issues not adequately briefed in the opening brief will not be reviewed. We merely hold that these principles, in and of themselves, do not supplant the plain error analysis envisioned by Congress and the Supreme Court.

B. Plain Error

Appellate courts have authority to recognize a "plain error that affects substantial rights" even in cases where the error was not brought to the district court's attention. Fed.R.Crim.P. 52(b)

. A court "will notice the alleged error and grant the appellant relief only when four requirements are met: (1) an error occurred; (2) the error is plain or obvious; (3) the error affects substantial rights; and (4) the error seriously affects the fairness, integrity, or public reputation of judicial proceedings." United States v. Pablo, 696 F.3d 1280, 1287 (10th Cir.2012) ; see also Olano, 507 U.S. at 730–32, 113 S.Ct. 1770. Of these four elements, only the first two appear to be challenged by the government on appeal. To satisfy the first two elements, assuming there was an error, it must be so clear or obvious that it could not be subject to any reasonable dispute. Puckett v. United States, 556 U.S. 129, 135, 129 S.Ct. 1423, 173 L.Ed.2d 266 (2009). We have previously held that an improperly calculated restitution award satisfies the third and fourth elements of the plain error standard. See United States v. Smith, 156 F.3d 1046, 1057 (10th Cir.1998). Regardless of whether it is in the restitution or forfeiture context, an order to exact a material amount beyond what a statute permits affects a defendant's substantial rights and undermines the fairness of the judicial proceeding.

C. Forfeiture

1. Statutory Scheme

If the government intends to pursue a forfeiture, Federal Rule of Criminal Procedure 32.2(a)

requires that the indictment "contain[ ] notice to the defendant that the government will seek the forfeiture of property as part of any sentence in accordance with the applicable statute." The indictment in this case made clear that the government would seek forfeiture pursuant to 18 U.S.C. § 981(a)(1)(C)

and 28 U.S.C. § 2461. To understand how these provisions apply to Mr. Courtney's wire fraud conviction, we must take somewhat of a circuitous route. Section 981(a)(1)(C) allows for the forfeiture of any property or proceeds traceable to an offense constituting a "specified unlawful activity." "Specified unlawful activity" is defined in 18 U.S.C. § 1956(c)(7). Under § 1956(c)(7)(A), a "specified unlawful activity" includes any offense listed in 18 U.S.C. § 1961(1). Among the offenses listed §...