United States v. Johnson
| Decision Date | 19 April 2018 |
| Docket Number | No. 16-4146,16-4146 |
| Parties | UNITED STATES OF AMERICA, Plaintiff - Appellee, v. JEREMY DAVID JOHNSON, Defendant - Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
(D. Utah)
ORDER AND JUDGMENT*Before PHILLIPS, McHUGH, and MORITZ, Circuit Judges.
After a jury trial—during which he represented himself—Jeremy Johnson was convicted of eight counts of making a false statement. See 18 U.S.C. § 1014. In this direct appeal, Johnson advances numerous challenges to both his convictions and the resulting 135-month sentence. But Johnson has waived many of these arguments: his opening brief neither identifies where he raised them below nor attempts to establish plain error on appeal. Thus, we decline to address these arguments. And we also decline, based on various other briefing deficiencies, to address several subsidiary arguments Johnson presents in support of his remaining challenges.
To the extent that Johnson has adequately briefed any challenges to his convictions, we reject those arguments on the merits. We do the same with most of Johnson's adequately briefed sentencing challenges. But we agree with Johnson that the district court erred in assessing a two-level enhancement based on its finding that Johnson received more than $1 million as a result of his offenses. Accordingly, although we affirm Johnson's convictions, we reverse his sentence and remand for resentencing.
Johnson's convictions and sentence arise from his role as the former President and sole owner of the now-defunct IWorks, Inc. (IWorks). The facts underlying Johnson's crimes are complex, familiar to the parties, and—for the most part—not particularly relevant to our evaluation of Johnson's arguments on appeal. Accordingly, we provide only a brief overview of those facts here and discuss additional historical and procedural facts below as they pertain to our analysis of the legal issues before us.1
Part of IWorks' business plan involved processing credit-card payments for items that customers purchased online. To process those payments, IWorks needed what's known as a "merchant account," App. vol. 38, 9875—"a type of business bank account that allows a business to accept and process debit[-] and credit[-]card transactions," Aplt. Br. 4 n.1. But in 2008, IWorks' ability to maintain a merchantaccount was threatened when it was placed on the Member Alert to Control High Risk (MATCH) list after IWorks incurred more than $3 million in fines arising from excessive chargebacks.
A chargeback occurs when a buyer who used a credit card to make a purchase becomes dissatisfied with the selling merchant's refund or return policy and reverses payment to that merchant through his or her credit card. Such chargebacks will result in fines if a merchant incurs more than 100 of them in a single month, or if at least one percent of the merchant's sales result in chargebacks. After three months of such fines, a merchant will typically find itself on the MATCH list. And placement on the MATCH list will generally result in an inability to acquire a new merchant account, without which a merchant can't process credit-card payments.
Thus, Johnson and other members of the IWorks team devised a strategy: they would set up multiple merchant accounts in names other than Johnson's. So long as no single merchant account's chargebacks exceeded 100 per month or one percent of sales, no fees would be assessed. And so long as no fees were assessed against any one merchant account for more than three months, no accounts would end up on the MATCH list.
In 2009, Wells Fargo Bank (WFB) began processing most of IWorks' credit-card transactions. WFB is a merchant-acquiring bank: it holds merchant accounts, thus enabling merchants to process credit-card transactions. Merchant-acquiring banks work with Independent Sales Organizations (ISOs), who market credit-card-processing accounts to merchants. Here, the ISO that began opening IWorks' new merchant accounts with WFB was an entity called CardFlex.
Eventually, Johnson and his associates completed 281 merchant-account applications with CardFlex's assistance. Some of the new merchant accounts ended up on the MATCH list. When that happened, Johnson and his associates simply abandoned them and moved processing to different accounts. But those abandoned accounts continued to accrue chargebacks. As a result, WFB eventually became suspicious and terminated several accounts after an investigation revealed that those accounts were all associated with Johnson. In the meantime, though, Johnson personally received at least $1,125,000 in profits from IWorks.
As a result of this scheme, in 2010, the Federal Trade Commission (FTC) initiated a civil consumer-fraud complaint against Johnson, IWorks, and various other individuals and entities in the United States District Court for the District of Nevada. And in 2011, the government indicted Johnson and several of his associates in the District of Utah for, among other things, multiple counts of making a false statement for the purpose of influencing a federally insured bank. See § 1014. After a joint trial at which Johnson represented himself, the jury found him guilty of making false statements on eight merchant-account applications. The district court ultimately sentenced Johnson to 135 months in prison. Johnson appeals.2
Before turning to the arguments that Johnson presents on appeal, we pause to discuss some general principles of forfeiture and waiver. As we explain more fully below, our application of these general principles to Johnson's specific arguments leads us to decline to address several of those arguments altogether.
First, "[i]t is the general rule . . . that a federal appellate court does not consider an issue not passed upon below." Singleton v. Wulff, 428 U.S. 106, 120 (1976). Thus, when a litigant fails to raise a particular argument below, we typically treat that argument as forfeited. Richison v. Ernest Grp., Inc., 634 F.3d 1123, 1128 (10th Cir. 2011). And when an appellant raises a forfeited argument or issue for the first time on appeal, we will reverse only if the appellant can satisfy our rigorous test for plain error. See United States v. Kearn, 863 F.3d 1299, 1305 (10th Cir. 2017), petition for cert. filed Dec. 21, 2017 (No. 17-7210); Richison, 634 F.3d at 1130 (). Critically, this rule applies not only when a litigant raises a completely new argument on appeal, but also "when 'a litigant changes to a new theory on appeal that falls under the same general category as an argument presented at trial.'" United States v. Nelson, 868 F.3d 885, 891 & n.4 (10th Cir. 2017) (quoting Lyons v. Jefferson Bank & Tr., 994 F.2d 716, 722 (10th Cir. 1993)).
To avoid having us treat its claims as forfeited, an appellant must, in its opening brief, "cite the precise reference in the record where [each] issue was raised and ruled on" below. 10th Cir. R. 28.2(C)(2). In the absence of such a citation, we may assume the appellant failed to raise the issue below—an assumption that will trigger plain-error review. See Harolds Stores, Inc. v. Dillard Dep't Stores, Inc., 82 F.3d 1533, 1540 n.3 (10th Cir. 1996) (); United States v. Williamson, 53 F.3d 1500, 1514 n.7 (10th Cir. 1995) (); United States v. Barber, 39 F.3d 285, 287 (10th Cir. 1994) ().
Moreover, when an appellant fails to affirmatively establish that it preserved a particular issue by raising it below and also fails to make a plain-error argument on appeal, we typically treat the issue as waived (rather than merely forfeited) and decline to review the issue at all—for plain error or otherwise. In that instance, we have explained, "the failure to argue for plain error and its application on appeal . . .marks the end of the road for" that argument. Kearn, 863 F.3d at 1313 (alteration in original) (quoting Richison, 634 F.3d at 1131).
Taken together, these general principles doom several of Johnson's arguments. As we discuss below, Johnson repeatedly either (1) fails to address whether he raised certain arguments below or (2) asserts that he raised arguments below but then provides record citations that don't support those assertions. Thus, we would normally treat his arguments as forfeited and review them only for plain error. See United States v. Ibarra-Diaz, 805 F.3d 908, 916 (10th Cir. 2015); cf. Barber, 39 F.3d at 287-88. But Johnson also repeatedly fails to argue for plain error. And that failure "marks the end of the road for" any arguments that Johnson fails to establish he raised below.3 Kearn, 863 F.3d at 1313 (quoting Richison, 634 F.3d at 1131)).
Moreover, even when Johnson manages to establish that he raised below the arguments he now presents to us on appeal, he fails to adequately develop several ofthose arguments in his opening brief. See Fed. R. App. P. 28(a)(8)(A) (). Were Johnson...
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