Thursday, March 25, 2010

"Seemingly innocent" activity sufficient to support probable cause for search warrant in light of initial tip and subsequent police surveillance

In United States v. Stearn, 08-3230 (3d Cir. March 9, 2010), the Third Circuit reversed a district court's suppression order after concluding that the searches conducted were supported by probable cause. Based on a tip from a confidential informant that defendants Michael and Joseph Doebley were selling cocaine powder supplied to them by Edward Stearn, police officers began surveillance of the defendants' homes and vehicles. The officers observed two controlled buys of cocaine involving one of the defendants, real estate records, utility bills, and police observation corroborated the informant's statement that defendants' cocaine business operated out of a gym, and the informant demonstrated knowledge of defendants' homes, cars, and daily routines. After the surveillance was completed, officers sought search warrants for five properties and 2 vehicles owned or frequented by the defendants. A magistrate judge issued the warrants and drugs, drug paraphernalia and money were recovered from all but one residence.

The district court granted the defendants' motions to suppress the recovered evidence because it found insufficient evidence of probable cause within the supporting search warrant affidavit. The court found that the affidavit contained no evidence regarding the reliability of the informant and no information connecting any of the searched locations to actual drug dealing activity. Because the court found the affidavit's defects so severe, it perfunctorily declined to apply the Leon "good faith" exception to the exclusionary rule. Finally, the court applied its suppression order to all of the defendants without determining standing as to each individual defendant.

On appeal, the Third Circuit found the district court's across-the-board exclusionary remedy to be a fundamental error. While the government had conceded each defendant's standing to challenge one or more specified searches, it actively disputed each defendant's right to challenge all the searches. The district court's failure to account for the government's defendant-specific concessions resulted in evidence being suppressed against a defendant who did not even challenge its admissibility, much less prove an expectation of privacy therein. Notwithstanding this fundamental error by the district court, however, the Third Circuit was unable to resolve the case on the standing prong alone because of the government's concessions regarding standing for each defendant as to one or more of the searches. Thus, the Court was compelled to determine the constitutionality of each search on a defendant-specific basis.

Turning to the probable cause determination, the Third Circuit found that the district court's probable cause analysis erroneously discounted the reliability of the confidential informant where the informant's tip was corroborated in significant part by independent police observation. Officers corroborated the defendants' drug involvement through two controlled buys, real estate records, utility bills, and the informant's knowledge of the defendants' homes, vehicles, and daily activities. Although there was no direct evidence that the defendants were dealing drugs out of their homes, the Court found circumstantial corroboration of the informant's tip in the defendants' "peculiar shuttling" among their properties and their frequent stops at a gym which police had linked to two drug deals. Finally, the Court found that the district court's refusal to consider Third Circuit precedent stating that it is reasonable, under certain circumstances, to infer that drug dealers often store evidence of drug crimes in their residences resulted from an unduly restrictive parsing of the case law.

Although the Third Circuit ultimately determined that the magistrate judge had a sufficient basis for his probable cause determination, it further held that, even if probable cause was lacking, the extreme sanction of exclusion was not warranted in this case. The Court noted that exclusion is a rare circumstance where a magistrate judge has found probable cause. Here, the district court improperly truncated its good faith analysis based on its erroneous characterization of the "bare bones" nature of the affidavit and its failure to credit circumstantial corroboration of the informant's tip. Furthermore, given the complexity of the district court's probable cause analysis, it was unreasonable to expect that lay officers executing the search warrant would have reasonably believed that the magistrate judge was incorrect in his probable cause determination.

Finally, examining each property in turn, the Third Circuit concluded that the informant's tip, in conjunction with the evidence adduced by officers in subsequent investigation, afforded the magistrate with a substantial basis for determining probable cause existed to search each of the properties at issue. The Court found each residence searched to be part of a network of suspiciously titled homes connected to at least one of the three defendants whose involvement in the drug trade had been confirmed through surveillance and controlled buys. Accordingly, the Court reversed the district court's suppression order and remanded the case for further proceedings.

Monday, March 22, 2010

Sentence vacated and remanded where the district court did not properly apply U.S.S.G. 2C1.1(b)(2) to determine the amount of a "benefit received"

In United States v. Lianidis, No. 09-1165 (D.NJ 03/19/10), the Court of Appeals vacated and remanded for re-sentencing where the district court did not properly apply section 2C1.1(b)(2) - a guideline provision which determines the amount of a “benefit received” for sentencing purposes.

Lianidis was the president of DMS, a computer engineering company founded by her husband. DMS was subsequently awarded government contracts to set up computer systems for the FAA. These contracts were awarded by a longtime friend of Lianidis, Darrell Woods (an employee of the FAA), who had received numerous cash payments (i.e bribes) from Lianidis which totaled over $150,000. While the contracts were secured with bribes, the work performed by Lianidis’ company was deemed “legitimate.” Thereafter, over a six year period, the FAA paid Lianidis’ company more than $6.7 million dollars.

Because of the bribes, Lianidis was indicted and pled guilty to three counts of bribery of a federal employee. Of importance, there was a plea agreement which expressly stated there was no agreement under § 2C1.1(b)(2) as to the calculation of “value, benefit, and loss.” This was the subject of dispute at sentencing and then again on appeal.

Prior to sentencing, the probation office recommended a 16-level increase, under § 2C1.1(b)(2), concluding that the “benefit received” by Lianidis was between $1,000,000 and $2,500,000. At sentencing, the district court agreed - the court calculated the “benefit received” using two approaches: the first was the “Landers approach” (based on United States v. Landers, 68 F.3d 82 (5th Cir. 1995)); and the second was the “salary approach.” The "Landers approach" calculates “benefit received” by deducting direct costs, but not indirect costs, from the gross proceeds of the illegally obtained contracts. The “salary approach” uses the salaries earned as a proxy for the “benefit received.”

Using both approaches, the district court found that the “benefit received” was in excess of $1,000,000. Consequently, the 16 level enhancement under § 2C1.1(b)(2) was applied which increased Lianidis’ base offense level to 25. With a criminal history category I the advisory guideline range was 57 - 71 months. Due to Lianidis’ personal circumstances, the Court granted a nine month downward variance and sentenced her to 48 months imprisonment. Lianidis appealed.
On appeal, Lianidis argued that the district court erred both in the application and use of the “Landers approach” as well as the use of the “salary approach.” And, as a result, Lianidis argued the district court committed clear error in its application of the 16-level enhancement.

First, with regard to the “Landers approach,” Liandis argued that the “benefit received” should be calculated by subtracting “legitimate costs” from the gross revenue - a slightly different approach than the method used in Landers. The Third Circuit disagreed. The Court, referring to an application note of § 2C1.1, observed the phrase “benefit received” was discussed in terms of “net value” and “profit.” With regard to “net value” the Court, relying on Landers, found that only "direct costs" should be subtracted because “indirect costs, like bribes, do not impact the harm caused by the bribery, and allowing the deduction of interest costs would foster inconsistency in sentencing.”

Liandis argued in the alternative, should the Court apply the "Landers approach," that "direct costs" should include both company overhead as well as her and her husband’s salaries. In response, the Third Circuit again referred to Landers to determine what constituted a “direct cost.” After providing lengthy definitions of both “direct” and “indirect costs,” the Court stated “succinctly whether a cost is direct or indirect depends on whether it can be easily attributable to the specific contract at issue.” In Lianidis’ case, the district court concluded (without explanation) that the company overhead and salaries were not “direct costs.” Consequently, the Third Circuit remanded the matter because the district court did not engage in the proper analysis.

Finally, with regard to the “salary theory,” Lianidis argued that the district court erred in calculating the “benefit received” in terms of “profit” based on her and her husband’s salaries. Again citing an application note to § 2C1.1, the Third Circuit agreed, stating that the “benefit received” is not the salary earned (legally), but rather the “net value” received by the company pursuant to the government contract.

In conclusion, the Court adopted the Fifth Circuit’s approach in Landers and concluded that “the ‘benefit received’ under § 2C1.1(b)(2) is the net value, minus direct costs, accruing to the entity on whose behalf the defendant paid the bribe.”

Of note, while Judge Hardiman agreed with the majority’s adoption of the "Landers approach," he dissented. He found no clear error and thought the sentence should have therefore been affirmed.

No per se rule that a prior conviciton under 4B1.1 must be established by a "certified" record

In United States v. Howard, No. 08-4748 (E.D.PA 03/19/10), the Court of Appeals affirmed the district court’s reference to “uncertified documents” in its determination that Mr. Howard was a career offender under U.S.S.G. § 4B1.1.

Howard entered a guilty plea to one count of possession with intent to distribute marijuana and one count of possession with intent to distribute marijuana within 1,000 feet of a school. At sentencing he objected to application of the career offender enhancement based on two prior drug convictions. As to one of the prior convictions, the district court relied on an incomplete certified conviction record and an uncertified Municipal Court document which indicated that Howard was convicted of felony drug conspiracy (no sentencing transcript was available). As a result, Howard’s base offense level of 13 (pursuant to § 2D1.1) was enhanced to 32 (pursuant to § 4B1.1). The district court sentenced Howard to 148 months and Howard appealed.

On appeal, Howard did not contest that he had two prior drug convictions, but rather argued that the district court impermissibly relied on uncertified documents in determining whether or not the career offender enhancement applied. The Court of Appeals disagreed. In doing so, the Court held that “evidence presented at sentencing must have a sufficient indicia of reliability to support its probable accuracy.” That the fact of a prior conviction is not an element of the crime and all the government needs to do at sentencing is present evidence that establishes the conviction by a preponderance of the evidence. The Court added that there is no “per se rule that certified copies of conviction must be offered by the government” to determine whether or not the career offender enhancement applies (a similar argument was rejected by the Court in United States v. Watkins, 54 F.3d 163, 168 (3d. Cir. 1995)).

The Court concluded that the district court’s reliance on the incomplete certified conviction record and the uncertified Municipal Court document to establish a prior drug conviction for career offender purposes was in keeping with the standard set forth in Shepard v. United States, 544 U.S. 13, 16 (2005)(a sentencing court may determine the existence of a prior conviction by relying on “the terms of the plea agreement, the charging document, the transcript of the colloquy ... or other comparable judicial record of sufficient reliability”)(emphasis added).

Thursday, March 18, 2010

Owner of Sporting Goods Store Must Forfeit Firearms Following Conviction for Being a Drug User in Possession of Firearms

United States v. Cheeseman, No. 09-1756, 2010 WL 699550 (3d Cir. Mar 2, 2010). The Third Circuit affirmed the district court’s forfeiture of some 600 firearms, potentially valued at $500,000, in connection with the defendant’s conviction for being a drug user in possession of firearms in violation of 18 U.S.C. § 922(g)(3).

The defendant, Cheeseman, was the owner and proprietor of a sporting goods store that maintained an inventory of approximately 600 firearms. Cheeseman developed an addiction to crack cocaine and eventually moved from his home into the warehouse of the store. The district court found that Cheeseman and other addicts used crack on the premises. Additionally, Cheeseman denied being a drug user on his renewal application for his federal firearms dealer license. Cheeseman eventually pleaded guilty to possession of firearms and ammunition by an unlawful user or addict of a controlled substance. The district court ordered the forfeiture of the firearms, which Cheeseman claimed to be valued at $500,000, pursuant to 18 U.S.C. § 924(d)(1). Cheeseman raised two arguments on appeal, viz., that the forfeiture was improper because the property was neither "involved in" nor "used in" a knowing violation of 18 U.S.C. § 922(g)(3) and that forfeiture violated the Excessive Fines Clause of the Eighth Amendment. Both arguments were rejected by the Third Circuit.

The Court of Appeals noted that 18 U.S.C. § 924(d)(1) would permit only forfeiture of firearms that were "involved in" nor "used in" Cheeseman’s offense. The Court held that because "mere possession" does not constitute use, the firearms were not "used in" the offense. The Court further held, however, that "the term's plain meaning leads to the conclusion that the seized firearms … were "involved in" the offense to which Cheeseman pled guilty because the firearms served as the foundation of his criminality and conviction. Indeed, without the firearms, there would have been no crime." The Court explained:
possession of firearms and ammunition is sufficient for a district court to find that the property was "involved in" a § 922(g)(3) offense. This interpretation of "involved in" makes sense in light of Congress' intent to keep firearms out of the possession of drug abusers, a dangerous class of individuals, and supports a finding that the seized firearms and ammunition were "involved in" Cheeseman's § 922(g)(3) offense. This conclusion is bolstered by the District Court's findings that: (1) Cheeseman had unfettered access to the full panoply of weapons located in [the store]; (2) he used crack cocaine in and around those weapons; and (3) he brought other drug abusers to the store and warehouse to smoke crack.

The Court also rejected Cheeseman’s argument the forfeiture constituted an excessive fine in violation of the Eighth Amendment because "the forfeiture of Cheeseman's firearms and ammunition was not grossly disproportionate to his 18 U.S.C. § 922(g)(3) offense because he was abusing drugs while illegally possessing firearms, he was part of the class of persons whose behavior the statute criminalized, and the value of the firearms was at most two times the maximum penalty imposed by the statute."

Deficient Seach Warrant in Child Porn Case "Saved" by Good Faith Exception

United States v. Tracey, No. 08-3290, 2010 WL 681364 (3d Cir. Mar. 1, 2010). The Third Circuit reversed the district court’s suppression order in a child pornography case and held that although the search warrant was deficient because it did not clearly indicate that the items-to-be-seized, the good faith exception applied because the "officer could understandably believe that he had met the requirements of the Fourth Amendment."

The defendant, Tracey, was the subject of a state investigation into the internet distribution of a certain video containing child pornography. Tracey’s IP address was identified as participating in the distribution of the video via a peer-to-peer sharing program. Based on that information, the local police obtained a search warrant for Tracey’s residence from a state magistrate. The warrant identified the items to be searched and seized as follows: "Any items, images, or visual depictions representing the possible exploitation of children including video tapes or photographs… COMPUTERS: Computer input and output devices to include but not limited to keyboards, mice, scanners, printers, monitors, network communication devices, modems and external or connected devices used for accessing computer storage media." A seven-page affidavit of probable cause was attached to the application for the warrant which described more specifically the items subject to the search. The Government conceded that the description of the items to be searched for and seized lacked the particularity required by the Fourth Amendment unless the affidavit of probable cause was incorporated. The Third Circuit found that the affidavit had not been incorporated because the application and the warrant did not contain any explicit words of incorporation and the description of the items to be searched for and seized did not incorporate the affidavit.

The Court of Appeals further held that while the warrant was constitutionally deficient because it lacked particularity, the exclusionary rule should not have been applied because the police acted in good faith in relying on the warrant because they could have reasonable believed that the warrant incorporated the narrower affidavit.

The District Court's indication of the sentence it would impose before the defendant allocuted was not reversible plain error.

              In United States v. Packer , 83 F.4th 193 (3d Cir. Sept. 26, 2023), , the ...