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TCL > October 2011 Issue > Summaries of Selected Opinions

October 2011       Vol. 40, No. 10       Page  135
From the Courts
U.S. Court of Appeals for the Tenth Circuit

Summaries of Selected Opinions

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: (click on "Opinions/Rules/Statutes").

No. 09-8084. Pater v. City of Casper. 07/25/2011. D.Wyo. Judge Tymkovich. Real Property—Contract With City—Notice of Assessment—Due Process.

Plaintiffs owned land in a subdivision in Casper, Wyoming (City). They were successors in interest to a Subdivision Agreement whereby they would construct Trevett Lane at their expense, on demand by City. Without telling plaintiffs, City had the developer of an adjoining subdivision construct Trevett Lane. City sought payment from plaintiffs for their share of the construction costs and recorded a Notice of Assessment against each plaintiff’s properties.

Plaintiffs sued, arguing that they did not owe the claimed sum because the contract required City to give them notice to construct Trevett Lane, not to pay for it after someone else built it. They also asserted that the Notices placed a cloud on their property title. They sued under 42 U.S.C. § 1983, claiming a violation of their due process rights. City countersued for breach of contract and other claims. The district court granted summary judgment in favor of City. Plaintiffs appealed.

Addressing plaintiffs’ due process claims, the Tenth Circuit held that plaintiffs had a property interest in their real property, rejecting City’s contention that the interest at stake was the opportunity to object to City’s demand for the construction of Trevett Lane. The Circuit held that the Notices of Assessment, although not empowering City to foreclose on the burdened property, nevertheless were a sufficient cloud on the title to cause a legally cognizable harm to plaintiffs’ property interests. Therefore, plaintiffs sufficiently alleged that they were deprived of a property interest.

The Circuit considered whether plaintiffs were afforded sufficient process to satisfy the Fourteenth Amendment. The record and briefs on this issue were sparse, so the Circuit remanded with instructions to determine whether City had a preexisting interest in the burdened property under the Subdivision Agreement or state law, whether plaintiffs had received any post-deprivation process, and the extent to which state law mandates additional procedures. The district court’s judgment was reversed and the case was remanded.

No. 10-2097. United States v. Waseta. 07/26/2011. D.N.M. Judge Holmes. Sentencing Guidelines—Non-Mandatory Nature—Upward Variance—Ex Post Facto Application.

Defendant pleaded guilty to one count of sexual abuse of a minor in Indian Country. At the time he committed the crime, the Sentencing Guidelines were considered mandatory and called for a sentencing range of fifteen to twenty-one months. By the time he was sentenced, the Supreme Court had declared the Guidelines advisory rather than mandatory. The district court, relying on the advisory Guidelines, varied upward from the Guidelines range and sentenced defendant to forty-six months’ imprisonment, followed by three years of supervised release. Although the count to which defendant pleaded guilty represented only a single sexual act, the charged offense was part of an eleven-year period of sexual abuse that began when the victim was 6 years old. The district court found that a sentence within the Guidelines range was inappropriate because of the very severe nature of the abusive circumstances.

On appeal, defendant argued this upward variance based on application of the advisory Guidelines resulted in a sentence that was utterly unforeseeable to him under the mandatory Guidelines regime, and therefore violated the Ex Post Facto Clause of the U.S. Constitution. The Tenth Circuit disagreed. The question is what a defendant could have realistically imagined that a sentencing court could do under the law in effect at the time he committed a crime. Here, given all factors present under the previous mandatory Guidelines regime, including the availability of upward departures for extreme psychological injury to the victim or extreme conduct, it was realistically imaginable that defendant could have received a sentence within the range of the sentence he actually received under the advisory Guidelines. The Circuit therefore affirmed the sentence.

No. 10-1439. United States v. Merriman. 07/27/2011. D.Colo. Judge McKay. Calculation of Loss—Credit for Money Returned to Victim When Provided to Government After Confession of Crime—Position of Trust Enhancement.

Defendant pleaded guilty to one count of mail fraud and one count of forfeiture. Although he was not previously under investigation, he approached the U.S. Attorney’s Office and revealed that he had engaged in a long-running Ponzi scheme in which he had defrauded investors of more than $20 million. He offered the government several million dollars worth of assets to be liquidated and used to compensate his victims. At sentencing, the district court refused to subtract the value of the assets he turned over to the government in calculating the aggregate loss to his victims. The district court also enhanced his sentence because he occupied a position of trust.

On appeal, defendant argued that he should have been credited with the money he turned over to the government to be distributed to his victims. The Tenth Circuit noted that an application note to Sentencing Guideline § 2B1.1 provides that credit can be applied where money is returned to the victim and this return occurs before the offense is detected or discovered by the victim or the government. Here, defendant did not return the money to his victims; he returned it to the government. Moreover, he did not return it until after he had disclosed his crimes. He therefore was not entitled to have the money turned over to the government credited toward the amount of loss in calculating his sentence.

Defendant was not entitled to avoid application of the position of trust enhancement. This enhancement applies when a defendant occupied a position of trust and used it to facilitate significantly the commission or concealment of a crime. It applied here because defendant retained and exercised authority to make investments on behalf of his investors with complete discretion, and with no obligation to disclose his financial accounting or investing decisions to them. The Circuit therefore affirmed defendant’s sentence.

No. 11-1248. Dudley-Barton v. Service Corp. Int’l. 07/28/2011. D.Colo. Judge Briscoe. Class Action Fairness Act—Removal to Federal Court—Remand to State Court—Voluntary Dismissal—Appeal is Moot.

A group of employees filed a class action lawsuit against Service Corporation International (SCI), alleging unlawful employment practices. SCI then removed the case to federal court pursuant to the Class Action Fairness Act. Plaintiffs moved to remand to state court. The district court granted the remand because SCI had not established that the amount in controversy exceeded the $5 million jurisdictional threshold. SCI requested permission to appeal.

On remand, plaintiffs moved to dismiss their case before SCI filed its answer, and the state court dismissed the case the same day. The Tenth Circuit granted leave to appeal. Plaintiffs argued that the appeal was mooted by the state court’s dismissal of their case.

The Circuit noted that remand orders are appealable only in the rare situations when a federal statute specifically permits an appeal. In the context of this case, when a plaintiff voluntarily dismisses its claims in state court, the pending federal appeal of the district court’s order of remand becomes moot. There exists an exception to the mootness doctrine in class action lawsuits where class certification is not granted before the named plaintiffs’ claims have become moot, but that exception did not apply here. The appeal was dismissed.

No. 10-1145. James River Insurance Co. v. Rapid Funding, LLC. 07/29/2011. D.Colo. Judge Matheson. Colorado Insurance—Breach of Contract—Good Faith—Damages—Expert Testimony Not Admissible—Colorado Common Law—New Statute Not Retroactive.

James River Insurance Co. insured a dilapidated Michigan apartment building owned by Rapid Funding, a Colorado company. After a fire destroyed the building, Rapid Funding claimed the full amount of the policy, $3 million. The insurance company determined the pre-fire value of the property to be less than zero and denied payment. The insurance company filed this declaratory judgment action, arguing that it owed nothing. Rapid Funding counterclaimed for breach of the insurance contract and breach of the covenant of good faith and fair dealing. In pretrial motions, the parties disputed whether the owner’s principal could testify as an expert about the property’s value. The district court ruled that he could not testify as an expert because his expert opinion was based in part on his "feeling" for the costs to rehabilitate the building. The court said he could testify as a non-expert about how he decided on the amount he claimed from the insurance company. The district court also held that a new Colorado statute, CRS § 10-3-1116, providing for double recovery, did not apply. Following a trial, a jury awarded Rapid Funding $3 million in compensatory damages and $2.35 million in punitive damages. The insurance company appealed.

The Tenth Circuit held that Rapid Funding’s principal’s valuation testimony was expert opinion testimony based on technical or specialized knowledge and therefore was inadmissible under F.R.E. 701(c). Thus, the Circuit did not address the claim that his testimony was inadmissible under F.R.E. 701(b) because it was unreliable. The district court abused its discretion in admitting the testimony. The Circuit rejected Rapid Funding’s argument that the testimony was properly admitted under Colorado common law that allows landowners to testify to the value of their property. Even if the common law applied, the common law and F.R.E. 701 do not conflict; the testimony was inadmissible under both.

The Circuit also held that the error in admitting the witness’s valuation testimony was not harmless, despite Rapid Funding’s claim that other evidence supported the jury’s damages verdict. Therefore, a new trial was required.

Finally, the Circuit held that CRS § 10-3-1116, which went into effect on August 5, 2008, after James River denied Rapid Funding’s insurance claim, was not retroactive, so it did not apply. The district court’s judgment was reversed and the case was remanded.

No. 10-4101. United States v. Manatau. 08/01/2011. D.Utah. Judge Gorsuch. Sentencing Guidelines—Calculation of Loss—Intended Loss—Use of Stolen Convenience Checks.

Defendant pleaded guilty to bank fraud and aggravated identity theft. In calculating his advisory Guidelines sentence, the district court assessed an intended loss much greater than the actual loss defendant inflicted on his victims. In one case, defendant was found with two stolen "convenience checks" that allow a credit card holder to write a check against his or her line of credit, and a credit card statement revealing that the credit limit on the stolen checks exceeded $30,000. In another case, the victim’s credit limit (unknown to defendant) exceeded $10,000, but defendant cashed the two convenience checks he stole for only $1,800. Had defendant cashed all stolen checks for the maximum available credit limits, he would have netted $60,000. This is the amount the government urged the district court to adopt as intended loss. The district court adopted the government’s figure and sentenced defendant accordingly.

On appeal, defendant argued that the district court failed to apply an appropriate mens rea standard when calculating his intended loss, which he contended was much lower than the figure the district court used. The Tenth Circuit agreed. "Intended loss" for purposes of Guideline § 2B1.1 means the loss defendant purposely sought to inflict; it does not mean a loss that defendant knew would result from the scheme, or that he possibly and potentially contemplated. Here, it would involve the amount defendant purposefully intended to steal by cashing the convenience checks.

The district court failed to inquire into defendant’s intention and purpose to cause the intended losses it assigned to him. The error was not harmless because it affected the Guidelines calculation and the sentence he received. The district court was permitted to draw reasonable inferences about defendant’s mental state from the available facts, but it had failed to make such a determination when calculating the intended loss. The Circuit therefore remanded for resentencing.

No. 10-8049. United States v. Fraser. 08/02/2011. D.Wyo. Judge Gorsuch. Felon in Possession Statute—Availability of Necessity Defense—Showing of Reasonable Legal Alternative to Possession of Firearm for Self-Defense.

Defendant was charged with, among other things, being a felon in possession of a firearm and with using that firearm to further a drug trafficking offense. As part of his defense to the charges, he sought to introduce evidence that he had shot and killed a man who threatened him. The killing was not charged as part of the federal prosecution. It was defendant’s position, however, that evidence of the shooting, which ordinarily would be highly prejudicial to him, was vital to his defense because it showed why he needed to illegally possess a firearm. After the district court entered an in limine ruling prohibiting him from introducing evidence of the killing, defendant pleaded guilty to the two firearms offenses. As part of his plea agreement, he reserved the right to appeal the district court’s in limine order.

The evidence defendant wished to introduce would have shown that after he and the victim quarreled, the victim threatened to kill him. In response to the threat, defendant drove his children to their grandparents’ house, traveled to a friend’s house where he traded cocaine for a rifle, and then returned home. When the victim returned to defendant’s house armed with a gun, defendant shot him with the rifle, killing him. The federal charges resulted from defendant’s purchase of and possession of the rifle.

On appeal, defendant argued that evidence about the shooting was essential to his necessity defense to the gun charges, and therefore should not have been excluded. The Tenth Circuit disagreed. It noted that the U.S. Code does not provide for a necessity defense to a felon in possession charge. Also, the common law necessity defense is weakest when used to justify the intentional taking of human life. Moreover, the evidence defendant sought to introduce did not support a necessity defense, because defendant failed to show he lacked any reasonable lawful alternative to shooting the victim. Instead of buying a rifle with cocaine, he could have called the police. Although defendant claimed he distrusted the police, he did not even try to contact them, an essential prerequisite to asserting the lack of a reasonable legal alternative.

The Circuit also rejected defendant’s challenges to the district court’s upward departure from the Guidelines and his challenge to the substantive reasonableness of his sentence. Accordingly, the district court’s judgment was affirmed.

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