Precedential Opinions of Note
Third Circuit Evaluates Standards for Conspiracy in Insider Trading Case
United States v. Metro (Feb. 14, 2018), No. 16-3813
Unanimous decision: Jordan (writing), Hardiman, Scirica
On April 10, President Trump nominated Paul B. Matey and David J. Porter to serve as Circuit Judges on the U.S. Court of Appeals for the Third Circuit. Mr. Matey currently oversees all legal and regulatory matters for University Hospital in Newark, New Jersey. Mr. Porter is in private practice at Buchanan Ingersoll & Rooney PC in Pittsburgh, Pennsylvania. The White House’s press release on these nominations can be found here.
Defendant disputed at sentencing that he acted “in concert” with someone who traded on his tips, and, thus, that the trader’s gains should not be attributed to Defendant in calculating the applicable Sentencing Guidelines range. The indictment was silent on that point, and the Government failed to introduce evidence on that point at trial or sentencing.
The Third Circuit vacated and remanded for re-sentencing at which the District Court must determine whether the Government established that Defendant “acted in concert with” or “provided inside information” to the relevant downstream trader.
“Before attributing gains to a defendant under §2B1.4’s gain analysis, a sentencing court should first identify the scope of conduct for which the defendant can fairly be held accountable for sentencing purposes under §1B1.3. After identifying the scope of conduct, the court should then analyze that conduct to determine whom the defendant “act[ed] in concert with” and to whom he “provided inside information[.]” USSG §23B1.4 cmt. Background. That may lead the court to attribute to a defendant gains realized by downstream trading emanating from the defendant’s tips, but, depending on the facts established at sentencing, it may not.” (Slip op. at 20.)
The District Court held that the Government did not conduct a Fourth Amendment search when it searched the computers of thousands of Internet users through a malware program. The district judge also rejected Defendant’s arguments that a single search warrant for these thousands of computers lacked particularity and was issued in violation of the jurisdictional requirements set forth in Federal Rule of Civil Procedure 41(b) and the Federal Magistrates Act.
The Third Circuit affirmed, despite holding that the search warrant violated Federal Rule of Civil Procedure 41(b) and that the magistrate judge approving the warrant exceeded her authority. The court held that evidence obtained pursuant to the invalid warrant should not be suppressed because law enforcement did not deceive the court and, therefore, suppression would lack any deterrent effect.
“[T]he . . . warrant was supported by probable cause and particularly described the places to be searched and things to be seized. This, on its own, is sufficient for us to determine that the FBI acted in good-faith, especially because there is no evidence that it exceeded the scope of its warrant.” (Slip op. at 26-27.)
Third Circuit Upholds Application of Relocation and Organizer/Leader Sentencing Enhancements
United States v. Thung Van Huynh (March 6, 2018), No. 17-2417
Unanimous decision: Hardiman (writing), Vanaskie, and Shwartz
Following Defendant’s guilty plea for conspiracy to commit bank and wire fraud, the District Court for the Middle District of Pennsylvania sentenced Defendant to 70 months of imprisonment. This sentence was based, in part, on the District Court’s findings that Defendant was subject to sentencing enhancements both for relocating the conspiracy to avoid detection and for acting as the organizer or leader of the conspiracy.
The Third Circuit held that the Government did not breach its plea agreement by failing to object to the application of the relocation enhancement. Further, the Third Circuit held that the sentencing court did not clearly err when it applied the relocation enhancement because Defendant targeted stores at great distances from his home and from each other while he tried to avoid detection. Similarly, the court held that the District Court did not clearly err in applying the organizer/leader enhancement because Defendant exercised significant “control over others in the commission of the offense.” (Slip op. at 19.)
“[T]he District Court did not clearly err in considering the geographic scope of the conspiracy and the dispersed nature of the locations to which the co-conspirators traveled when deciding whether to credit Huynh’s claim that the scheme’s travels reflected only an expansion of its operations [which, in Defendant’s estimation, made the relocation enhancement inapplicable].” (Slip op. at 13.)
En Banc Panel Revisits Standard for Abuse-of-Trust Sentencing Enhancement
United States v. Douglas (March 15, 2018), No. 15-1754
Majority opinion: Greenaway, Jr. (writing), McKee, Ambro, Jordan, Krause, and Restrepo
Dissenting opinion #1: Hardiman
Dissenting opinion #2: Shwartz (joined by Chagares and Vanaskie)
As part of Defendant’s position as an airport mechanic, he was permitted to bypass standard screening mechanisms when entering the airport. Defendant repeatedly used this security exemption to smuggle cocaine into the airport terminal. At sentencing, Defendant objected to the application of the abuse-of-trust sentencing enhancement. The U.S. Sentencing Guidelines dictate that courts should impose a two-level sentencing enhancement “[i]f the defendant abused a position of public or private trust . . . in a manner that significantly facilitated the commission or concealment of the offense.” U.S.S.G. § 3B1.3.
The Third Circuit held that the sentencing judge should not have imposed an abuse-of-trust sentencing enhancement. In remanding Defendant’s case, the court rejected the Pardo test to determine whether the defendant actually occupied a position of public or private trust. Under the new standard established in Douglas, courts should look to whether a defendant had the discretion to make decisions free from supervision while holding a position of trust.
“[W]hen determining if the defendant occupied a position of trust, we will ask whether the defendant had the power to make decisions substantially free from supervision based on (1) a fiduciary or fiduciary-like relationship, or (2) an authoritative status that would lead his actions or judgments to be presumptively accepted. In answering this question, we will not consider the context of the crime committed . . .” (Slip op. at 15.)
Judge Hardiman dissented, writing that the court should interpret the Sentencing Guidelines “according to their plain language” and refrain from adding “extra-textual ‘tests.’” (Judge Hardiman dissent at 1.)
Judge Shwartz, joined by Judges Chagares and Vanaskie, similarly dissented based on their belief that the abuse-of-trust enhancement allows for consideration of the context of Defendant’s crime in determining “whether he occupied a position of trust and abused it.” (Judge Shwartz dissent at 1.)
Obstruction-of-Justice Sentencing Enhancement Requires Proof of Willful Misconduct
United States v. Douglas (March 15, 2018), No. 15-1754
Unanimous decision: Shwartz (writing), Greenaway, Jr., Vanaskie
Defendant failed to appear for the first day of his criminal trial, but produced hospital records showing that he was receiving treatment for chest pains. The sentencing judge nonetheless imposed a two-level enhancement for obstruction of justice as provided for in the Sentencing Guidelines.
The Third Circuit reversed the District Court’s imposition of the obstruction-of-justice sentencing enhancement and remanded for re-sentencing because the record lacked evidence that Defendant “willfully failed to appear.” (Slip op. at 14.)
“Absent such proof from the Government showing willfulness [by Defendant in his failure to appear for the first day of trial], and in light of the medical documentation presented [by Defendant] indicating a lack of willfulness, the application of §3C1.1 enhancement was improper.” (Slip op. at 15-16.)
Non-Precedential Opinions of Note
United States v. Juan Pablo Flores-Juarez (Feb. 27, 2018), No. 17-2070
Deported Defendant’s appeal of his sentence is not moot because he still suffers collateral damage due to this sentence (i.e., he remains subject to certain restrictions of supervised release, including his prohibition on entering the United States without the written permission of the Attorney General).
United States v. Hilliard (March 14, 2018), No. 17-1340
The Third Circuit vacated and remanded Defendant’s sentence finding insufficiently specific the District Court’s assessment that Defendant was “in for a penny and for a pound if [his co-conspirators] . . . did any act . . . in pursuance of the object of the conspiracy.” (Slip. op. at 4.) The court noted that, in determining restitution, courts must conduct a “searching and individualized inquiry into the circumstances surrounding each defendant’s involvement in the conspiracy.” Id.
United States, ex rel. v. The City of Pittsburgh & Luke Ravenstahl (March 28, 2018), No. 17-1987
The Third Circuit overturned the District Court’s dismissal of Appellants’ qui tam complaint. The trial court granted Appellees’ motion to dismiss on two, independent grounds: (1) the basis of the complaint was public information within the meaning of the “public disclosure bar,” and (2) the alleged misconduct was not material because it concerned “conditions of participation” in a federal program, not “conditions of payment.” First, with respect to the public disclosure bar, the Third Circuit held that it was premature to dismiss the complaint on this ground because, among other reasons, Appellants claimed that they did not rely on publicly available reports of the Appellees’ conduct. Second, with respect to materiality, the Third Circuit directed that the district court must apply the standards enunciated by the Supreme Court in Universal Health Services, Inc. v. United States ex rel. Escobar (2016), which ask whether Appellees’ alleged misconduct could have influenced the Government’s payment decisions.