Summaries of selected Tenth Circuit Court of Appeals Opinions appear on a space-available basis. The summaries are prepared for the Colorado Bar Association (CBA) by Katherine Campbell and Frank Gibbard, licensed Colorado attorneys. They are provided as a service by the CBA and are not the official language of this Court. The CBA cannot guarantee the accuracy or completeness of the summaries. Full copies of the Tenth Circuit decisions are accessible from the CBA website: www.cobar.org (click on "Opinions/Rules/Statutes").
No. 07-1438. Russell v. United States. 12/19/2008. D.Colo. Judge Brorby. Foreclosure—Tax Lien—State Law Preempted—Lien Not Extinguished.
Plaintiffs filed suit to quiet title in their real property on which the Internal Revenue Service had recorded a federal tax lien arising from the tax debt of the previous owner. Plaintiffs acquired the property through a foreclosure sale, but the government was not given notice of the sale. The district court applied Colorado law and ruled that the government’s remedy was to redeem or purchase the property or forfeit its lien. Consequently, the court granted judgment to plaintiffs.
The government appealed. The Tenth Circuit initially noted that Congress has the power to preempt state law. Preemption may be express or implicit. Implicit preemption may occur when Congress intends federal law to occupy the field or when state law is preempted to the extent it conflicts with a federal statute. Applying principles of statutory construction, the Circuit considered the applicable state and federal laws.
Under Colorado law, the interest of a lienholder who is not named in the foreclosure action may be terminated if he or she is afforded rights of cure and redemption. The omitted lienholder has a right to redeem the property within a specified time; if he or she does not, title of the property vests in the holder of the foreclosure certificate of purchase.
In contrast, under federal statutory law, a federal tax lien continues to attach to property as long as the United States recorded its lien at least thirty days before the sale and did not receive notice twenty-five days in advance of the sale. Concluding that the federal law conflicted with the state law, the Circuit held that the state law was preempted. Accordingly, because the government was not given advance notice of the foreclosure sale, the tax lien was not extinguished and it remained undisturbed on the title to the property. The district court’s judgment was reversed and the case was remanded with instructions to grant the government’s motion to dismiss.
No. 07-6257. United States v. Baum. 12/22/2008. W.D.Okla. Judge Hartz. Wire Fraud—Sufficiency of the Evidence—Loss Calculation—"Intended" Loss.
Defendant was convicted of wire fraud and money laundering after he allegedly orchestrated a scheme that defrauded mortgage lenders. He acted as the real estate agent for buyers who sought subprime loans to purchase homes. The homes were sold at the seller’s listed price, but the "true" price of the home actually was much lower.
Under an addendum to the real estate contract that was not disclosed to the mortgage lender, the seller agreed to pay a portion of the purchase price to a named company for "remodeling" or "repairing" the home. This sum was not used for repairs but instead was funneled to the buyer to make his or her down payment, as well as funneled to the defendant and his associates.
The mortgage lender was not informed of the true nature of the transaction. The loan application falsely represented that the buyer had not borrowed any money for the down payment and it usually contained false information concerning the buyer’s income and assets.
On appeal, defendant challenged the sufficiency of the evidence underlying his convictions. He contended that all of the financial arrangements were fully disclosed; that the inflated home values were based on subjective appraisals; and that the failure to have the repair work actually done on the homes amounted merely to a breach of contract and was not a crime.
The Tenth Circuit rejected these challenges. There was extensive evidence that the mortgage lenders were not fully informed about the financial transactions involving the home purchases. Moreover, defendant’s guilt did not turn on whether the repair work actually was performed, but on whether the lender was correctly informed about the use to be made of its funds.
Defendant also challenged the loss calculation used to arrive at his sentence. The district court added sixteen levels to defendant’s base offense level for Sentencing Guideline purposes, based on an intended loss in excess of $1 million. It reached its calculation of loss by adding the amounts by which the inflated price of each home exceeded the actual sales price. Defendant argued that the actual loss was much lower, based on the amount of the price obtained at foreclosure sales, and that he intended no loss because he did not want the purchasers to default. The Circuit rejected this argument. "Intended" loss does not mean loss that is subjectively desired by a defendant, but rather refers to loss a defendant knows or should know may result from his or her activities.
The degree to which such a loss must be foreseeable to the defendant remains an open question—depending on whether the loss must be "virtually certain to occur" rather than merely a "probable consequence" of the defendant’s actions. Here, however, defendant did not raise the issue of the precise quantum of proof in the district court. He failed to demonstrate that the district court’s application of the Guidelines was erroneous under a plain error standard.
No. 08-8000. United States v. Dennis. 12/22/2008. D.Wyo. Judge Kelly. "Crime of Violence"—Categorical Approach—Use of "Indecent Liberties" Conviction.
Defendant pled guilty to being a felon in possession of a firearm. The district court increased his base offense level for Sentencing Guidelines by six levels, reasoning that his prior Wyoming conviction for immoral or indecent acts was a "crime of violence." The pertinent state statute prescribed "taking immodest, immoral or indecent liberties with any child [defined as a person under the age of 18 years] or encouraging any child to cause or encourage another child to commit with him any immoral or indecent act."
Defendant was convicted by a state jury of engaging in sexual intercourse with a 16-year-old. The district court reasoned that the conviction was a "crime of violence" based on and involving the risk of physical injury, pregnancy, and sexually transmitted infections.
On appeal, defendant argued that his prior conviction was not a "crime of violence." In determining this issue, courts generally follow a "modified categorical approach." Where the statute of conviction is ambiguous or broad enough to encompass both violent and nonviolent crimes, a court may look to certain records of the prior proceeding, including the charging documents, the judgment, any plea, and findings by the sentencing court, but it may not make a subjective inquiry into the underlying facts of the prior conviction. Here, however, the parties agreed that the statute was not ambiguous and that there was no need to look beyond its language.
The Tenth Circuit determined that the Wyoming indecent liberties statute did not categorically describe a crime of violence. The crime described by the statute did not have as an element the use of physical force against the person of another. The government argued that the crime involved "conduct presenting a serious potential risk of physical injury to another"; however, that definition comes into play only where the offense is roughly similar to examples provided in the Guidelines, such as burglary, arson, or extortion. The offense of immoral or indecent acts is not similar in risk to these crimes. The crime described here did not categorically involve the use of force or assault. The Circuit remanded to permit the district court to vacate defendant’s sentence, and to resentence him absent the enhancement.
No. 07-6214. United States v. Wilfong. 12/23/2008. W.D.Okla. Judge McConnell. Calculation of Restitution—Lost Wages.
Defendant pled guilty to calling in a bomb threat to Tinker Air Force Base. As a result of the threat, thousands of employees were forced to evacuate one of the buildings on the base for several hours. The district court sentenced defendant to forty-eight months’ imprisonment, which represented an upward variance from the recommended Sentencing Guidelines range of twenty-four to thirty months. The court also ordered him to pay approximately $475,000 in restitution, most of which represented the cost of lost employee work hours caused by the evacuation.
On appeal, defendant challenged the basis for the restitution order. He argued that restitution for lost work hours was equivalent to restitution for "lost income," which is not statutorily available in property damage cases. The Tenth Circuit disagreed. The Circuit, reasoning that an employee’s work time is the "property" of the employer, determined that Tinker Air Force Base lost the value of this "property" due to the bomb threat and subsequent evacuation, and therefore was entitled to restitution of that value. The value was that of the employees’ wages, not of any income or profit that might have been generated by their efforts.
The restitution award did not run afoul of the traditional prohibition on awarding consequential damages in restitution cases. The expected consequence of issuing a bomb threat is that the building will be evacuated, thus leading to a loss of work time. This is a direct, not a consequential, form of damages. The Circuit further held that the district court provided an adequate rationale for departing upward from the recommended Guidelines range.
No. 08-4054. United States v. Clarkson. 01/06/2009. D.Utah. Judge Murphy. Fourth Amendment—Search and Seizure—Good-Faith Exception—Unqualified Police Dog.
Defendant was convicted of possession of a firearm by a convicted felon. He attempted unsuccessfully in the district court to suppress the evidence obtained by a search of the vehicle he was driving. He renewed his challenge to this evidence on appeal.
The evidence showed that Officer Sutera was monitoring a residence believed to be involved in narcotics dealing, violent crime, prostitution, and gang activity. He ran a computer check on a Cadillac parked in front of the residence, and found that it lacked insurance and its registration had expired. Defendant later exited the residence and drove away in the Cadillac.
Officer Sutera stopped the vehicle and ordered defendant to place his hands outside the window. Defendant claimed the car belonged to his mother. A passenger in the car appeared to be under the influence of narcotics. A computer check revealed that defendant had a valid license and no outstanding warrants.
Approximately two minutes after Officer Sutera pulled defendant over, a second officer arrived with "Oso," a K-9 patrol dog. The second officer noted that the car defendant was driving resembled the vehicle described by a victim of a recent beating and pistol-whipping. Officer Sutera asked defendant to get out of the car so he could verify that defendant did not have any weapons. The officer did a pat-down search and did not find any weapons. In the meantime, the second officer had Oso sniff the Cadillac for narcotics. The dog alerted to the exterior of the front passenger-side door and, later, on the driver’s and front passenger’s seats. The officers decided to search the car. Inside it, they found a fanny pack that contained a handgun. No drugs were found.
Although Oso had undergone narcotics training, he did not complete the eight-week narcotics certification course due to an injury, and lacked certification. The district court concluded that this lack of certification did not matter, because there was no evidence that Officer Sutera knew the dog was unreliable. Once Oso alerted to the suspected presence of drugs, this provided Officer Sutera with probable cause to search the vehicle.
On appeal, the Tenth Circuit determined that under the totality of the circumstances (the early morning hour; defendant’s emergence from a high-crime residence that was under surveillance; the passenger’s seemingly intoxicated behavior; and the description of the vehicle from a report of prior criminal activity), reasonable suspicion existed for the questioning, the pat-down, and the initiation of the dog-sniff. However, the search of the automobile required probable cause. Probable cause can be based on alerts by trained dogs, but these dogs must be qualified to provide such support.
Here, the district court essentially applied a "good-faith" exception to the exclusionary rule, finding that Officer Sutera relied in good faith on the other officer’s representation that Oso’s alerts would be reliable. However, this exception does not apply to mistakes made by law enforcement personnel; it applies only where the mistake was made by someone other than the police, such as a magistrate. The Circuit therefore remanded for a determination by the district court concerning whether Oso was properly trained or otherwise reliable.
No. 07-6201. Dixon v. Kirkpatrick. 01/08/2009. W.D.Okla. Judge McConnell. Government Employee’s Free Speech Rights—Confidential Ongoing Investigation—Public Concern—Balance Interests.
Plaintiff, a clerk for the Oklahoma Board of Veterinary and Medical Examiners (OBVME), was discharged because she discussed OBVME’s investigation of a dogfighting ring with an outside veterinarian. She sued, claiming she had been fired in violation of her First Amendment free-speech rights. The district court ruled that the employer was not entitled to qualified immunity, and the employer appealed.
The Tenth Circuit outlined the elements for determining whether plaintiff, a government employee, was denied her constitutional rights by being terminated for her speech, now called the Garcetti/Pickering test [Garcetti v. Ceballos, 547 U.S. 410 (2006); Pickering v. Bd. of Educ., 391 U.S. 563, 568 (1968)]. The employer did not dispute that plaintiff’s duties did not include discussing ongoing investigations; that she was terminated because of her speech; and that her speech was on a matter of public concern. The Circuit weighed plaintiff’s interest in making the speech and her audience’s interest in hearing it against the government employer’s interest in regulating speech that interferes with its operations. By speaking out, plaintiff risked compromising the ongoing dogfighting investigation and frustrated the ability of OBVME to control and fashion its own message. Therefore, the employer’s interests prevailed.
The Circuit held that an investigative agency is within its rights as an employer to discipline an employee with access to confidential materials for discussing details of an agency investigation with an outside party. The district court’s judgment was reversed and the case was remanded for entry of summary judgment in favor of the employer.
No. 06-3387. Brown v. Day. 01/13/2008. D.Kan. Judge Ebel. Younger Abstention Doctrine—State Agency Proceedings—Coercive or Remedial—Medicaid.
Plaintiff, a developmentally disabled adult, received Medicaid benefits for her residential care. She had assets in trust, but had no legal authority to compel distribution, because the trustee had discretion to decide on trust spending.
In 2004, Kansas changed its law concerning when trust assets are deemed available to Medicaid recipients. The new law provides that assets are available if the trustee, using the full extent of his or her discretion, may make any of the income or principal available to the recipient. Plaintiff was deemed to have available to her all of her trust assets, which made her ineligible for Medicaid.
In agency proceedings, plaintiff challenged the denial of benefits, but the state agency ruled against her. Instead of pursuing judicial review in state court, plaintiff filed suit in federal court, claiming that the agency violated federal Medicaid law. She sought a declaratory judgment and an injunction from terminating her coverage. The district court held that the Younger abstention doctrine required it to dismiss the case [Younger v. Harris, 401 U.S. 37 (1971)].
The Younger abstention doctrine requires a federal court to abstain from exercising jurisdiction when (1) there is an ongoing state criminal, civil, or administrative proceeding; (2) the state court provides an adequate forum to hear the claims; and (3) the state proceedings involve matters traditionally resolved by looking to state law or policy. The Tenth Circuit considered whether the state proceedings were coercive or remedial, and discussed the characteristics of each type. In coercive state proceedings (a state’s enforcement of its laws or regulations in an administrative proceeding), Younger deference applies. Remedial state proceedings (other administrative proceedings—the plaintiff need not exhaust state remedies), on the other hand, are not entitled to Younger deference. In this case, the administrative proceeding was remedial, not coercive, so the federal district court improperly abstained. The judgment of dismissal was reversed and the case was remanded for further proceedings.