United States v. Kennert
| Docket Number | 22-1998 |
| Decision Date | 03 August 2023 |
| Parties | UNITED STATES OF AMERICA, Plaintiff-Appellee, v. BRYAN ALAN KENNERT, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
NOT RECOMMENDED FOR PUBLICATION
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN
Before: STRANCH, BUSH, and MURPHY, Circuit Judges.
The court delivered a PER CURIAM opinion. MURPHY, J. (pp. 9-12) delivered a separate concurring opinion, in which BUSH, J joined.
Bryan Kennert sold a couple some $43,000 worth of counterfeit baseball cards. He pleaded guilty to wire fraud. To determine Kennert's guidelines range, the district court needed to calculate the amount of the "loss" from his offense. U.S.S.G. § 2B1.1(b)(1). The actual loss was easy to identify: the $43,000 or so that he took from his victims. But the police also uncovered many other fake cards in his home, including a Babe Ruth card that, if genuine, would have been worth millions. The district court found that Kennert planned to sell these other cards for over $1 million. It relied on this much larger intended loss to increase his guidelines range.
Kennert claims that § 2B1.1 required the district court to use the actual loss-not the intended loss-to calculate the loss amount. He also claims that the district court's valuation of the counterfeit cards found at his home rested on rank speculation. But we recently rejected his legal argument that § 2B1.1 bars courts from relying on intended loss. See United States v. You, __ F.4th __, 2023 WL 4446497, at *12-13 (6th Cir. July 11, 2023). And the district court's valuation finds firm support in the opinions of a trading-card expert. We thus affirm.
Kennert sold trading cards from a booth that he leased in the Anything and Everything Antique Mall in Muskegon, Michigan. On a day that Kennert was away from his booth, a married couple stopped by in search of rare baseball cards. They left their contact information, and Kennert later connected with them via text and telephone. He told the couple that he had once operated a baseball-card store but had grown tired of the business and placed most of his inventory in storage. He suggested, though, that he still had plenty of rare packs of cards.
After researching some of the packs that Kennert claimed to own the couple learned that he offered to sell them at prices well below their market rates. Between April and October 2019, they chose to buy many packs from Kennert on eight occasions. These eight transactions ranged in price from $31.80 to $14,840 and had a total value of over $43,000.
Yet the couple soon grew suspicious of the authenticity of the packs they bought from Kennert. Among other reasons, a Michael Jordan rookie card from one pack was too large to fit in a standard-size protective case. So the couple asked two appraisers to value the cards. To their chagrin, each expert identified the cards as counterfeit. One appraiser further opined that the cards would have been worth about $200,000 if they had been genuine.
The couple complained about Kennert to law enforcement. After an investigation, federal authorities searched his home. Their search turned up many other counterfeit trading cards. Of most note, Kennert possessed a fake 1916 Babe Ruth card.
Ultimately, a grand jury indicted Kennert on eight counts of wire fraud-one count for each transaction with his victims. Kennert pleaded guilty to all eight counts without a plea agreement.
Before Kennert's sentencing, a probation officer prepared his presentence report. Under the relevant guideline, his total offense level for the fraud depended on the amount of the "loss." See U.S.S.G. § 2B1.1(b)(1). A loss of $43,000 (the approximate amount that Kennert's victims had paid for the fake packs) would have increased his offense level by 6 levels. Id. § 2B1.1(b)(1)(D). Based on the guideline's commentary, however, the presentence report suggested that the district court should hold Kennert responsible for the "intended loss" from the counterfeit cards found at his home. To calculate this intended loss, the government retained a trading-card expert from a retailer named the Baseball Card Exchange. This expert opined that these cards (if they had been genuine) would have had a market value of nearly $4.36 million. Kennert had sold other counterfeit cards for about 25% of their actual (if genuine) value. The presentence report thus recommended that the court use this percentage. The report calculated the intended loss from the cards at Kennert's house as $1.09 million (25% of $4.36 million). This larger loss amount increased Kennert's offense level by 14 levels. Id. § 2B1.1(b)(1)(H). It also produced a guidelines range of 27 to 33 months' imprisonment. If the presentence report had relied only on the actual loss, by comparison, Kennert's guidelines range would have dropped to 8 to 14 months' imprisonment.
Kennert raised legal and factual objections to the presentence report's use of the greater loss figure. Legally, Kennert argued that the relevant fraud guideline required the court to calculate his offense level using only the actual loss to his victims and not the intended loss to unknown parties. Although this guideline's commentary directed the court to include the intended loss, Kennert further asserted, the court must disregard this commentary because it conflicted with the unambiguous text of the guideline itself.
Factually, Kennert argued that the presentence report's estimation of the amount of the loss from the cards at his home ($1.09 million) was "speculative[.]" PSR, R.31, PageID 125. In response, the government produced a second valuation report from its expert at the Baseball Card Exchange that now valued the cards at a much larger number-about $7.33 million. At a forfeiture hearing, this expert testified that he chose the larger number after spending significantly more time researching the valuations. That said, the government recommended that the district court stick with the expert's initial (lower) number because Kennert may have relied on it when pleading guilty.
At sentencing, the district court rejected both of Kennert's arguments. The court held that the commentary permissibly interpreted the fraud guideline to require courts to use a defendant's intended loss (not just the victim's actual loss) when calculating the defendant's guidelines range. It next found that the presentence report reasonably estimated the amount of Kennert's intended loss by relying on the expert's initial loss number. The court sentenced Kennert to 30 months' imprisonment.
On appeal, Kennert raises the same legal and factual challenges to the presentence report's calculation of the "loss" that he asserted in the district court. But our recent precedent requires us to reject his legal argument, and our standard of review requires us to reject his factual one.
The fraud guideline instructs courts to increase a defendant's offense level based on the amount of the "loss." U.S.S.G. § 2B1.1(b)(1). The relevant paragraph starts with this sentence:
"If the loss exceeded $6,500, increase the offense level as follows[.]" Id. It then requires larger and larger increases to the offense level as the "loss" from the offense rises. Id. So a loss of "[m]ore than $40,000" (but less than "$95,000") generates an offense-level increase of 6, whereas a loss of "[m]ore than $550,000" (but less than "$1,500,000") generates an offense level increase of 14. Id. § 2B1.1(b)(1)(D), (H). Critically, however, this guideline nowhere defines the key word "loss." See United States v. Riccardi, 989 F.3d 476, 486 (6th Cir. 2021).
The commentary to the guideline attempts to fill in this gap. It provides pages of substantive instructions on how to calculate the loss in various circumstances. As relevant here, the commentary defines "loss" to mean the "greater of actual loss or intended loss." U.S.S.G. § 2B1.1, cmt. n.3(A) (emphasis added). It then defines "intended loss" to "mean[] the pecuniary harm that the defendant purposely sought to inflict," including even "intended pecuniary harm that would have been impossible or unlikely to occur[.]" Id. § 2B1.1, cmt. n.3(A)(ii).
The Sentencing Commission's choice to put these instructions in the commentary-rather than the guideline-has repercussions for our review. We do not automatically defer to the commentary because of the way that the Commission may change it. To amend a guideline, the Commission must use notice-and-comment rulemaking and give Congress a potential veto. See United States v. Havis, 927 F.3d 382, 385 (6th Cir. 2019) (en banc) (per curiam). But the Commission need not follow these procedural protections for the commentary. See id. at 386. These differences have led the Supreme Court to analogize the Commission's commentary to an executive agency's informal interpretation of its substantive regulations. See Riccardi, 989 F.3d at 484 (discussing Stinson v United States, 508 U.S. 36 (1993)). Under that analogy, the Commission may use its commentary to interpret an ambiguous guideline that is susceptible to a range of meanings, but it may not use the commentary to amend a clear guideline that has only one meaning. See Havis, 927 F.3d at 386. As we have explained, therefore, we will defer to the commentary's interpretation of a guideline only if the guideline's text is "genuinely ambiguous" and only if the commentary's reading "falls 'within the zone of [any] ambiguity'" that we find in the text. Riccardi, 989 F.3d at 486 (quoting Kisor v. Wilkie, 139 S.Ct. 2400, 2414, 2416 (2019...
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