United States v. Eyraud

• Decision Date: 22 October 2015
• Docket Number: No. 14–50261.,14–50261.
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Roxanne Lynn EYRAUD, Defendant–Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

809 F.3d 462

UNITED STATES of America, Plaintiff–Appellee,

v.Roxanne Lynn EYRAUD, Defendant–Appellant.

No. 14–50261.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 3, 2015.

Filed Oct. 22, 2015.

Joseph S. Camden (argued), Federal Defenders of San Diego, Inc., San Diego, CA, for Defendant–Appellant.

Laura E. Duffy, United States Attorney, Peter Ko, Assistant United States Attorney, Chief, Appellate Section Criminal Division, Melanie K. Pierson (argued), Assistant United States Attorney, United States Attorneys' Office, San Diego, CA, for Plaintiff–Appellee.

Appeal from the United States District Court for the Southern District of California, M. James Lorenz, Senior District Judge, Presiding. D.C. No 3:12–cr–02998–L–1.

Before: DIARMUID F. O'SCANNLAIN, STEPHEN S. TROTT, and JAY S. BYBEE, Circuit Judges.

OPINION

TROTT, Senior Circuit Judge:

I

Over a two-year period, Roxanne Eyraud stole $264,824.10 from her employer Rhino Building Services ("RBS"). Her embezzlement scheme involved writing extra payroll checks both to herself and to other unknowing employees. She forged her employer's signature on the checks, cashed them, and kept all the money for herself. Also, she mischaracterized thirty-four entries in RBS's Quickbooks accounting program as tax payments made by company check to the Internal Revenue Service ("IRS") covering the period from November, 2006 to June, 2008. These bogus checks totaled $82,348.90—money owed to the IRS but not remitted. The phantom check payments entered into Quickbooks were actually made payable to and cashed by Eyraud. She hid the paper checks to conceal her forgery.

RBS discovered part of Eyraud's theft in 2008 when an auditor spotted approximately $150,000 worth of bogus checks. She confessed and covered the loss with $150,000 from a well-to-do relative. Eyraud did not alert RBS to the approximately $145,887.97 the auditor had not yet spotted, nor did she tell the company she had kept for herself the money listed in Quickbooks as paid to the IRS. The rest of Eyraud's thefts came to light in 2010.

II

Pursuant to a negotiated agreement, Eyraud pleaded guilty to bank fraud in violation of 18 U.S.C. § 1344, one count of a ten count indictment. The court eventually sentenced her to time served with three years of supervised release. In addition, the court ordered her to pay restitution to RBS in the amount of $425,445.44. This total included (1) $114,224.10 in unrecovered stolen money, (2) $128,372.02 in tax deficiencies and penalties caused by her fraud, (3) $9,052 for forensic accounting fees, and (4) $173,797.32 in attorneys' fees.

III

Because the March 11, 2013, plea agreement was negotiated before RBS's full loss had been calculated, the agreement obligated the government to recommend restitution in the amount of only $145,887.97. This number represented Eyraud's embezzled funds not yet repaid ($114,824.10) and the resulting tax penalties and interest known as of the date of the agreement ($31,063.87). The sum did not include RBS's attorneys' fees. On June 5, 2013, the Probation Office informed the court that RBS would be seeking considerably more in restitution than the amount specified in the plea agreement. Attorneys' fees now became an issue.

At a sentencing hearing on September 23, 2013, RBS appeared in court with private counsel to justify its request for additional restitution. RBS's appearance triggered a series of additional hearings and multiple dueling submissions by both RBS and Eyraud. On March 27, 2014, RBS supplemented its request with twenty-six invoice summaries—not the original invoices themselves—for attorneys' fees paid by RBS showing the attorney involved, the number of hours worked, and the hourly rate of each attorney. RBS also produced an eight-page sworn declaration from their attorney explaining his law firm's billing policy, the extent of the legal and investigative work performed, and the resumés of the attorneys who performed the work, as well as a summary of the tax damage done to RBS by Eyraud's scheme, calculated by quarter. Counsel's declaration asserted that the withheld original invoices contained information protected by both the attorney client and/or work product privileges.

At a contested hearing on April 3, 2014, RBS refined its request, and the court took the issue of restitution under submission, setting Eyraud's sentencing for April 24, 2014. Because of its plea agreement, the government continued to sit on the restitution sidelines.

On April 21, 2014, the court asked for the original invoices relating to the summaries previously submitted. The court said that it wanted to review the "billing rate and work completed by each attorney...." On April 23, 2014, RBS filed the requested documentation ex parte, "for court's eyes only," and in camera, once again asserting the attorney client and/or work product privileges regarding "communications and information" in the originals.

On April 24, the court sentenced Eyraud, but set a later date to determine attorneys' fees and prejudgment interest. The court denied Eyraud's counsel's request for the original invoices, saying, "Well I'm not inclined to turn over the billing records, but when I rule, I will ... explain my ruling to such a degree that you would be able to make any objections."

Final judgment day arrived on May 29, 2014, almost one year after RBS entered the fray on its own behalf.

In explaining its analysis and findings of fact and conclusions of law, the court indicated that the "backup billing documentation" RBS had provided was consistent with the invoice summaries. The court added that the attorneys had been careful not to include any fees not related to Eyraud's criminal case. True to its promise, the court explained its ruling in thoughtful detail. Counsel renewed his objection to the court's decision not to give him access to the original invoices. Counsel voiced his understanding that "implicit in the ... [court's] order" was a denial of his assertion that the material he sought was not protected by any privilege.

IV

Issues

Eyraud presents us with six issues. First, whether the district court "erred in concluding that the attorneys' fees incurred by RBS were reasonably necessary." In his reply brief, however counsel takes a different tack, now claiming that the district court failed to apply the "reasonably necessary" test, and was ignorant of the test altogether.

Second, whether the court denied statutory and constitutional due process to Eyraud in denying access to the original billing invoices submitted in camera by RBS.

Third, whether the district court failed to account for $85,402.32 in the amount of attorneys' fees awarded.

Fourth, whether the court erred in finding that RBS's tax penalty and interest loss were proximately caused by Eyraud's conduct.

Fifth, whether the IRS's abatement of 30% of the delinquent tax payments and interest was the true measure of Eyraud's damage to RBS, not the 70% Eyraud paid to the government.

Sixth, whether after Paroline v. United States, ––– U.S. ––––, 134 S.Ct. 1710, 188 L.Ed.2d 714 (2014), a jury, not a judge, must make the factual findings that support an order of restitution.

V

Standard of Review

We review the district court's restitution order "for an abuse of discretion, provided it is within the bounds of the statutory framework. Factual findings supporting an order of restitution are reviewed for clear error." United States v. Waknine, 543 F.3d 546, 555 (9th Cir.2008) (citation omitted). We review de novo Eyraud's due process claims.

VI

Attorneys' Fees

A. The Law

The Mandatory Victims Restitution Act ("MVRA"), 18 U.S.C. § 3663A, requires a district court to "order a defendant to make restitution to a victim of certain specified offenses." United States v. Anderson, 741 F.3d 938, 951 (9th Cir.2013) (citation omitted). The amount of restitution is limited to the victim's "actual losses" that are a direct and proximate result of the defendant's offense. United States v. Hunter, 618 F.3d 1062, 1064 (9th Cir.2010). The MVRA lists certain losses that are undoubtedly compensable, including "expenses incurred during participation in the investigation or prosecution of the offense." § 3663A(b)(4). However, so long as any loss—not just those incurred during investigation or prosecution—is an "actual loss" suffered as a result of a defendant's qualifying crime and the MVRA's causation standard is satisfied, a district court must include the amount of that loss in its restitution order. See Hunter, 618 F.3d at 1064 ; United States v. Peterson, 538 F.3d 1064, 1074 (9th Cir.2008).

Normally but not exclusively, the government proves the amount of loss and causation by a preponderance of the evidence. See Peterson, 538 F.3d at 1074–75. However, the statute setting the procedure for awarding restitution under the MVRA, 18 U.S.C. § 3664, also "authorizes the district court to allow a victim to prove up its own claim for restitution when the court deems it appropriate to do so." United States v. Gamma Tech Indus., Inc., 265 F.3d 917, 924 (9th Cir.2001).

When a victim does prove up its claim, it does not do so as a formal party to the proceedings, but as someone damaged by the defendant's crime. Id. at 924–25 ; §§ 3663(a)(1)(A); 3664(a). We note that in Gamma Tech, the government vigorously opposed allowing the third-party victim to bring its own restitution request. See Gamma Tech, 265 F.3d at 922. Here, RBS was similarly left to fend for itself in its request for restitution because the government's earlier plea deal with Eyraud tied its hands.

A meaningful difference exists between the role a victim like RBS plays at a restitution hearing and that of the prosecutor. See United States v. Alverson, 666 F.2d 341, 349 (9th Cir.1982). The victim's interest is focused on making itself whole. The non-party victim does not advocate for a larger fine or longer prison sentence. And even if the victim were to do so, the district court would be powerless to increase...