United States v. Harvey

• Decision Date: 09 December 2021
• Docket Number: No. 20-1869,20-1869
• Citation: 20 F.4th 71
• Parties: UNITED STATES of America, Appellee, v. Stephen Z. HARVEY, Jr., Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

20 F.4th 71

UNITED STATES of America, Appellee,

v.Stephen Z. HARVEY, Jr., Defendant, Appellant.

No. 20-1869

United States Court of Appeals, First Circuit.

December 9, 2021

Jonathan Scott Lauer, Assistant Federal Public Defender, for appellant.

Alexandra W. Amrhein, Assistant United States Attorney, with whom Nathaniel R. Mendell, Acting United States Attorney, was on brief, for appellee.

Before Lynch, Selya, and Barron, Circuit Judges.

LYNCH, Circuit Judge.

In 2011, the district court imposed its original criminal sentence against Stephen Z. Harvey, Jr., including a restitution order to the corporate victim payee. Purporting to act under Federal Rule of Criminal Procedure 36, the district court amended the restitution portion of that sentence nine years later, substituting the receiver of the corporate victim as the restitution recipient.

Although Harvey did not raise the issue in the district court, we reverse the amended restitution order on jurisdictional grounds. Compelled by 18 U.S.C. § 3664(o), our case law which interprets an analogous provision in 18 U.S.C. § 3582, and "the general rule of finality" governing criminal convictions and sentences, see Dillon v. United States, 560 U.S. 817, 824, 130 S.Ct. 2683, 177 L.Ed.2d 271 (2010), we hold that the district court was divested of jurisdiction over the restitution order once the order was entered as part of Harvey's final criminal judgment. On these facts, we do not identify any statutory authority, including the Mandatory Victims Restitution Act of 1996 ("MVRA"), 18 U.S.C. §§ 3663A, 3664, that provides a basis for jurisdiction. Because the district court invoked Rule 36 for an amendment that could not be properly made under it, the district court acted without jurisdiction.

We recognize the common-sense appeal of what the district court did and that this result benefits a wrongdoer. Nonetheless, we are bound to follow established law.

I. Background

Only those facts necessary to frame the issues raised on appeal are discussed below.

A. The Initial Proceedings

Harvey is the former Chief Financial Officer of Sleep HealthCenters LLC ("SHC"), a Massachusetts-based limited liability company focused on diagnosing and treating sleep disorders. In that position, he embezzled more than $600,000 of company funds by issuing company checks to himself and third parties to whom he owed money, and by manipulating SHC's accounting system to conceal those transactions.

In May 2011, Harvey was charged by information with one count of mail fraud, see 18 U.S.C. § 1341, and one count of interstate transportation of stolen property, see id. § 2314. After he waived indictment and pleaded guilty to both counts, the district court imposed a below-guideline sentence of twenty-four months' imprisonment, to be followed by three years of supervised release, as well as the restitution order we next describe.¹

The district court further determined that the victim of the offense was SHC and ordered Harvey to pay criminal restitution to the company's then-President and Chief Executive Officer, Paul Valentine, in the amount of $635,060.70. At the sentencing hearing, the district court rejected a lengthier sentence because of the "hefty" restitution and in order to "facilitate the prompt repayment to the victim." The court entered the final judgment of conviction and sentence after conviction, which included the restitution order, on September 30, 2011.

B. The Dissolution of SHC and Substitution of KCP as the Restitution Payee

SHC ceased business operations in early 2013. The Massachusetts Superior Court for Suffolk County subsequently placed SHC in a receivership, appointing as receiver KCP Advisory Group, LLC ("KCP"). KCP oversaw the sale of SHC's assets until SHC officially dissolved as a corporate entity in June 2015. About one year later, the Suffolk County Superior Court entered final judgment terminating the receivership and discharging KCP from its obligations.

Harvey paid little of the restitution he owed, though the sentencing court had reduced his term of imprisonment in light of the restitution order. By October 2019, Harvey had paid less than $9,000 in restitution, that is, less than two percent of his total debt. Based on his non-payment, the government applied for a writ of continuing garnishment under 28 U.S.C. § 3205(b)(1), seeking to garnish Harvey's wages and income. After the district court allowed the writ in November 2019, and Harvey's employer filed an answer confirming his employment, the government moved for an order of continuing garnishment and Harvey moved, with leave of court, to quash the writ.

Harvey argued the writ of continuing garnishment should not issue because the corporate victim was no longer in business and had no successor-in-interest. The government argued in response that the court could "use its equitable powers to name KCP ... as successor victim to SHC"² or, in the alternative, direct the payments to the Crime Victims Fund, established by the Victims of Crime Act of 1984, 34 U.S.C. § 20101(a).

On February 19, 2020, without a hearing, the district court denied Harvey's motion to quash and allowed the motion of the government for an order of continuing garnishment (the "February Order"). At that time, the district court did not amend the restitution order; rather, it stated that "it ha[d] authority under Fed. R. C[rim.] P. 36 to amend the judgment as to the payee of restitution."³ The court, in that same order, noted that "it [wa]s not clear on the [then-] current record that it [wa]s possible or feasible to have the receiver ... substituted [ ] for SHC," so the court directed the government to confer with KCP "to seek reinstatement as receiver for the purpose of receiving and distributing restitution payments from Mr. Harvey." If such reinstatement proved to be infeasible, the court stated that the restitution award would, upon the government's motion, be assigned to the Crime Victims Fund. Harvey did not file an objection to any portion of the order and did not object to or question the assertion by the court that it had authority under Rule 36 to amend the restitution order in response to the government's motion.

In accordance with the district court's instruction, in March 2020, KCP filed in Suffolk County Superior Court an emergency motion to reopen the receivership to administer the restitution award. The state court reopened the receivership on July 30, 2020. In the interim, none of the parties had questioned the court's authority to act under Rule 36 to substitute the receiver as the restitution payee.

Following the allowance of KCP's motion to reopen the receivership to administer the restitution award, the district court announced in an electronic order entered on August 27, 2020 that Harvey's outstanding restitution payments were to be directed to KCP (the "August Order"). The court cited its February Order as support. The August Order did not name the Crime Victims Fund as an alternative recipient. There remained no objection or notification by the parties questioning the court's Rule 36 authority.

On September 4, 2020, the sentencing court entered the amended judgment pursuant to Rule 36, substituting KCP as the restitution payee.⁴ The total amount of restitution Harvey was ordered to pay remained unchanged. Harvey appeals from that amended judgment, together with the February and August Orders.

Harvey's most telling argument on appeal is that the district court lacked jurisdiction to amend the criminal judgment. He contends the district court's reliance on Rule 36 to amend the restitution judgment was error because the Rule permits the correction of only clerical errors in a judgment and the amendment in this case was substantive in nature. He further argues the MVRA provides no basis for the court's order. For these reasons, Harvey contends the court was without authority to amend the restitution portion of his criminal judgment which was final as of 2011.

The government, in response, argues that " Rule 36 does not implicate a court's subject-matter jurisdiction." The government contends that Harvey's Rule 36 challenge is subject to plain error review because Harvey failed to object contemporaneously to the district court's reliance on the Rule. Under plain error review, the government argues, the amendment must stand. The government further contends that, in any event, the MVRA authorizes courts to substitute suitable restitution payees where, as allegedly here, the victim is "deceased" or "incapacitated." See 18 U.S.C. § 3663A(a)(2).

II. Discussion

As we must, we start with whether the district court had subject-matter jurisdiction to amend the restitution portion of Harvey's criminal judgment. See Royal Siam Corp. v. Chertoff, 484 F.3d 139, 142 (1st Cir. 2007) ; see also United States v. Mercado-Flores, 872 F.3d 25, 28 (1st Cir. 2017) ("Even where, as here, no jurisdictional issue was broached in the district court, we have an affirmative obligation to examine jurisdictional concerns." (internal quotation marks omitted)). Harvey argues the district court lacked such jurisdiction because 18 U.S.C. § 3582(b) renders judgments of conviction final. Subject to the narrow exceptions set forth in 18 U.S.C. § 3582(b) – (c) and other statutes, Harvey contends a district court has no authority to amend any portion of the final criminal judgment after it has entered. Our understanding of 18 U.S.C. § 3582, case law interpreting it, and "the general rule of finality" of criminal convictions and sentences, see Dillon, 560 U.S. at 824, 130 S.Ct. 2683, compel us to adopt Harvey's view.

We reject the government's position that this appeal does not present a jurisdictional issue. The controlling precedents we next describe lead us to this conclusion. Subsection 3582(b) states that, "[n]othwithstanding the fact that a sentence to imprisonment can subsequently be [modified in specified ways,] ... a judgment of conviction that includes such a sentence constitutes a...