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United States District Court, S.D. New York

May 21, 2004.


The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge


Defendant Patrick Savin ("Savin") moves for a "cumulative effects" downward departure under United States Sentencing Guidelines ("U.S.S.G." or the "Guidelines") § 5K2.0 and 18 U.S.C. § 3553 (b)(1), and pursuant to recent Second Circuit opinions. For the reasons set forth below, the motion is granted, and the Court will downwardly depart four levels.

Prior Proceedings

  On March 13, 2002, Savin pleaded guilty to one count of wire fraud in violation of 18 U.S.C. § 1343 and one count of perjury in violation of 18 U.S.C. § 1623. The details of the offense are laid out in United States v. Savin, 00 Cr. 45, 2002 WL 31520472 (S.D.N.Y. Oct. 22, 2002), familiarity with which is presumed.

  On October 21, 2002, Savin was sentenced to thirty-three months' imprisonment followed by three years supervised release. The sentence was based on the finding by this Court that the four-level Sentencing Guidelines enhancement under U.S.S.G. § 2 F1. 1(b)(6)(b) for an offense that "affected a financial institution" and from which "the defendant derived more than $1,000,000 in gross receipts" was not applicable to Savin's sentence. See id. at *4. It was held that § 2 Fl.1(b)(6)(b) did not apply because Mezzonen, S.A. ("Mezzonen"), the institution which Savin defrauded, was not a "financial institution" under the law of Luxembourg, where Mezzonen is organized and has its principal place of business. See id. The government appealed the decision, and the Second Circuit reversed, holding that a "foreign investment company," as that term is defined in Application Note 14 to U.S.S.G. § 2 F1.1,

includes a company located outside the United States substantially engaged in the business of investing in securities of other companies, whether or not it is an entity that is an "investment company" under the law of the jurisdiction where it is registered and where it has its principal place of business.
United States v. Savin, 349 F.3d 27, 39 (2d Cir. 2003). The case was remanded to this Court "for resentencing in the course of which it will be required to determine whether Mezzonen was a foreign investment company' or `similar entity.'" Id.


  Following the Second Circuit's decision, counsel for Savin "reluctantly concluded that the breadth of that decision prevents us from arguing that the four-level Sentencing Guidelines `financial institution' enhancement does not apply at resentencing." Letter to Court from Edward J.M. Little, dated April 22, 2004 ("4/22/04 Letter"), at 1. However, Savin argues that he qualifies for the "cumulative effects" downward departure announced by the Second Circuit in a series of three decisions: United States v. Lauersen, 348 F.3d 329 (2d Cir. 2003), United States v. Jackson, 346 F.3d 22 (2d Cir. 2003), and on rehearing of both cases, United States v. Lauersen and Jackson, 362 F.3d 160 (2d Cir. 2004), cert. denied, 2004 WL 817165 (U.S. May 17, 2004) (hereinafter "Lauersen/Jackson"). In these decisions, the Second Circuit explained that a sentencing court in its discretion may downwardly depart, pursuant to 18 U.S.C. § 3553(b)(1) and U.S.S.G. § 5K2.0, "when the addition of substantially overlapping enhancements results in a significant increase in the sentencing range minimum (as it does at the higher end of the sentencing table)." Lauersen/Jackson, 362 F.3d at 164.

 The Plea Agreement Does Not Preclude Savin from Making A Downward Departure Motion

  The government argues that Savin is precluded from making a motion for downward departure based on the plain terms of the plea agreement entered into by Savin and the government on March 12, 2002 (the "Plea Agreement"). The Plea Agreement states, in relevant part:

The Government contends that, pursuant to U.S.S.G. § 2 F1.1(b)(6)(b), the base offense is increased by 4 levels . . . because the offense affected a financial institution and the defendant derived more than $1,000,000 in gross receipts from the offense. The defendant contends that U.S.S.G. § 2 F1.1(b)(6)(b) is inapplicable. The parties agree that the parties may litigate this issue at sentencing. Based upon the calculations set forth above, the defendant's stipulated sentencing Guidelines ranges are 33 to 41 months (level 20) if the Court determines that U.S.S.G. § 2 F1.1(b)(6)(b) is inapplicable and 51 to 63 months (level 24) if the Court determines that U.S.S.G. § 2 F1.1(b)(6) (b) is applicable . . .
The parties agree that neither a downward nor an upward departure from the Stipulated Guidelines Ranges set forth above is warranted. Accordingly, neither party will seek such a departure or adjustment, or suggest that the Court sua sponte consider such a departure or adjustment.
. . . nothing in this agreement limits the right of the parties . . . (ii) to make any arguments regarding where within the Stipulated Guidelines Ranges set forth above (or any other range as the Court may determine) the defendant should be sentenced.
. . . In the event that the Probation Department or the Court contemplates any Guidelines adjustments, departures, or calculations different from those stipulated to above, the parties reserve the right to answer any inquiries and to make all appropriate arguments concerning the same.
Plea Agreement at 3-5.

  "Principles of contract law and special due process concerns for fairness govern [the] interpretation of plea agreements." Spence v. Superintendent, Great Meadow Correctional Facility. 219 F.3d 162, 167-68 (2dCir. 2000) (citing United States v. Rodgers, 101 F.3d 247, 253 (2d Cir. 1996)). Further, the rules of contract law have to be applied to plea agreements with two things in mind which may require their tempering in particular cases. First, the defendant's underlying "contract" right is constitutionally based and therefore reflects concerns that differ fundamentally from and run wider than those of commercial contract law. Second, with respect to federal prosecutions, the courts' concerns run even wider than protection of the defendant's individual constitutional rights — to concerns for the honor of the government, public confidence in the fair administration of justice, and the effective administration of justice in a federal scheme of government.

 United States v. Ready, 82 F.3d 551, 558 (2d Cir. 1996) (quoting United States v. Harvey, 791 F.2d 294, 300 (4th Cir. 1986)).

  An agreement not to make a downward departure is enforceable if the defendant knowingly and voluntarily entered into the plea agreement. See United States v. Beimah, 3 F.3d 609, 611 (2d Cir. 1993) ("Given that defendants can waive elemental constitutional and statutory rights, there is no reason why defendants should not be able to waive their less fundamental prerogative to request a downward departure.").


To determine whether a plea agreement has been breached, we "look[] to the reasonable understanding of the parties as to the terms of the agreement." United States v. Colon, 220 F.3d 48, 51 (2d Cir. 2000). Because the government "`ordinarily has certain awesome advantages in bargaining power,'" any ambiguities in the agreement must be resolved in favor of the defendant. United States v. Padilla, 186 F.3d 136, 140 (2d Cir. 1999) (quoting United States v. Ready, 82 F.3d 551, 558-59 (2d Cir. 1996)).
United States v. Riera, 298 F.3d 128, 133 (2d Cir. 2002). ".Contract language is unambiguous when it has a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion." Photopaint Technologies. LLC v. Smartlens Corp., 335 F.3d 152, 160 (2d Cir. 2003) (quoting Met. Life Ins. Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir. 1990)). Further, because of "the Government's advantage in bargaining power and recognizing that the Government usually drafts plea agreements," the Second Circuit "construe[s] such agreements `strictly against the Government.'" United States v. Cunningham, 292 F.3d 115, 117 (2d Cir. 2002) (quoting Ready. 82 F.3d at 559).

  The government argues that because Savin has acknowledged that U.S.S.G. § 2 F1.1(b)(6)(b) is applicable, there is only one Stipulated Guideline Range, namely 51 to 63 months, corresponding to adjusted offense level 24. Even if there were two possible ranges before the applicability of U.S.S.G. § 2 F1.1(b)(6)(b) had been determined, there could only be one range after that determination had been made.

  Savin, conversely, argues that it is clear that a motion for downward departure is permissible as long as at is "within the Stipulated Guidelines Ranges set forth above," Plea Agreement at 3, and that a motion for a departure from level 24 to level 20 is within the plural "Ranges." Savin also argues that a motion for a "`cumulative effects" departure is litigating only the applicability of U.S.S.G. § 2 F1.1(b)(6)(b) because the departure would not be available unless the 4-level financial institutions enhancement were applicable.

  Savin's motion for a downward departure cannot be made within the carve-out in the plea agreement for litigating the applicability of U.S.S.G. § 2 F1.1(b)(6)(b). Savin has conceded the applicability of the enhancement following the Second Circuit's decision, and no further litigation is permissible under the terms of the Plea Agreement.

  As to whether the Plea Agreement permits a motion for a downward departure "within the Stipulated Guidelines Ranges." the text is ambiguous. Undoubtedly, the government's reading is more plausible, and can account for the two-pronged stipulation as to the Sentencing Guideline Range depending on whether U.S.S.G. § 2 Fl.1(b)(6)(b) was deemed applicable or not. Savin's reading of the Plea Agreement, however, while questionable, is not so implausible that it may be deemed unambiguous. See Record Club of America. Inc. v. United Artists Records. Inc., 890 F.2d 1264, 1270-71 (2d Cir. 1989) (reversing grant of summary judgment on contract claim " [t]hough the [district] court termed one of the interpretations `improbable' . . . ").

  A similarly ambiguous plea agreement was construed against the government by the Fourth Circuit in Harvey, where the government stipulated in the plea agreement that "[t]he Eastern District of Virginia further agrees not to prosecute [the defendant] for any other possible violations of criminal law arising from the offenses set out in the indictment or the investigation giving rise to those charges." Harvey, 791 F.2d at 296 n.l. Thereafter, a grand jury in the District of South Carolina indicted the defendant. The defendant moved the district court in the Eastern District of Virginia to enjoin the South Carolina prosecution according to the terms of the plea agreement. The district court denied the motion, holding that "it must enforce the `very precise language' of the plea agreement as negotiated and "reduced to writing' by competent counsel." Id. at 299. On appeal, the Fourth Circuit reversed, rejecting the government's argument that the plea agreement "unambiguously identified the only prosecutorial agency bound not to prosecute, or the only geographical area within which the obligation not to prosecute existed (or possibly, perforce, both)," observing that "the agreement literally said neither of these." Id. at 301. In this case, by the literal terms of the Plea Agreement, Savin is precluded only from a downward departure from the "Stipulated Guideline Ranges," rather than from a single range.

  Because the Plea Agreement is ambiguous, any presumptions as to its meaning must be construed strictly against the government. Cunningham, 292 F.3d at 117; Riera, 298 F.3d at 133. The prohibition against a "downward departure . . . from the Stipulated Guideline Ranges" will therefore not preclude a motion seeking a departure from level 24 to level 20.

  Even if the Plea Agreement were unambiguous as a matter of law, it cannot be construed to waive the right to a downward departure which did not exist at the time of the agreement. A waiver of the right to make a downward departure, like the waiver of a right to appeal, is only effective if it is the "intentional relinquishment or abandonment of a known right or privilege." United States v. Sanchez-Peralta, 97 Cr. 536, 1998 WL 63405, at *8 (S.D.N.Y. Feb. 13, 1998) (quoting Johnson v. Zerbst, 304 U.S. 458, 464 (1938)). Further, "the government must demonstrate that the defendant had a full awareness of both the nature of the right being abandoned and the consequences of the decision to abandon it.'" Id. (quoting Patterson v. Illinois, 487 U.S. 285, 292 (1988).

  Savin's situation is analogous to the defendant in Salas v. United States, 139 F.3d 332 (2d Cir. 1998). Salas pleaded guilty to using and carrying a firearm during a drug trafficking crime in violation of 18 U.S.C. § 924 (c). Id. at 324. Three years after his guilty plea, the Supreme Court held in an unrelated case, Bailey v. United States, 516 U.S. 137 (1995), that a conviction under the "use" prong of § 924(c) required evidence sufficient to show an active employment of the firearm by a defendant. The Second Circuit permitted Salas to "invoke an intervening change in law to challenge collaterally" whether the facts he allocated to at his plea still constituted a crime. Id. at 325. The Salas court adopted the reasoning of the Seventh Circuit in Lee v. United States, 113 F.3d 73 (7th Cir. 1997), which asked rhetorically, "how can [petitioner] be held to have waived his right to challenge whether those facts constituted a crime when at the time they did, and after Bailey they may not? He could not possibly be viewed as having voluntarily waived what turns out to be a Bailey challenge when Bailey did not exist at the time he pled guilty." Salas, 139 F.3d at 324-25 (quoting Lee, 113 F.3d at 75). As in Salas, Savin cannot be deemed to have waived his unknown right to argue for a "cumulative effects" departure.

  Finally, even if Savin is otherwise prohibited from moving for a downward departure, the terms of the plea agreement precluding such a motion should be invalidated in the interests of fairness. See Ready, 82 F.3d at 559 ("[C]ourts may apply general fairness principles to invalidate particular terms of a plea agreement."). The Court also "has the authority to grant a departure on this ground sua sponte, even though the defendant may have entered into a plea agreement in which [he] agreed not to move for a downward departure." United States v. Ekhator, 17 F.3d 53, 55 (2d Cir. 1994). The provision in the Plea Agreement preventing either Savin or the government from "suggest[ing] that the Court sua sponte consider" a downward departure has been considered by one district court to be the "equivalent" of the prohibition on a motion for downward departure, because "a defendant's `suggestion' that the Court depart sua sponte is an oxymoron." United States v. Zukerman, 129 F. Supp.2d 198, 200-01 (E.D.N.Y. 2000). Even if Savin's motion for downward departure were improper, the Court's authority to depart sua sponte cannot be restricted by the mere filing of the motion.

 The "Cumulative Effects" Departure

  In Lauersen and Jackson, the Second Circuit held that a district court has the discretion to downwardly depart when the "substantial overlap" between two or more enhancements has "a significant effect upon the applicable sentencing range." Lauersen, 348 F.3d at 344; see also Jackson, 346 F.3d at 26. The Second Circuit reasoned that

the cumulation of such substantially overlapping enhancements, when imposed upon a defendant whose adjusted offense level translates to a high sentencing range, presents a circumstance that is present "to a degree" not adequately considered by the Commission, see 18 U.S.C. § 3553(b)(1), and therefore permits a sentencing judge to make a downward departure.
Lauersen, 348 F.3d at 344 (citing United States v. Gigante, 94 F.3d 53, 56 (2d Cir. 1996), amending 39 F.3d 42, 48 (2d Cir. 1994)).

  In Lauersen, the district court had applied two of the same enhancements to the defendant which are applicable to Savin — the 13-level enhancement for amount of loss greater than $2,500,000 pursuant to U.S.S.G. § 2 F1. 1(b)(1)(N), and the four-level enhancement for conduct affecting a financial institution and resulting in a gain to defendant in excess of $1,000,000 pursuant to § 2 F1. 1(b)(6)(b).*fn1 Id. at 332. The court first noted that the combination of the two enhancements is not impermissible double-counting because each enhancement "serve[s] different purposes." Id. at 343-44 (citing United States v. Campbell, 967 F.2d 20, 25 (2d Cir. 1992)). It held, however, that "there is substantial overlap between the two enhancements; the large amount of money involved in the fraud significantly triggers both of them." Id. at 344.

  In Jackson, the defendant pleaded guilty to various fraud charges and a conspiracy charge, all relating to an identity theft scam. The defendant's "base level of 6 was increased 10 levels because his offense involved a large sum of money, another 2 levels because he carefully planned the activity, another 2 levels because he used sophisticated means, and another 4 levels because the scheme was extensive." Jackson, 346 F.3d at 26. The Second Circuit again noted that while "these enhancements are sufficiently distinct to escape the vice of double counting, they substantially overlap" because "they are all little more than different ways of characterizing closely related aspects of Jackson's fraudulent scheme." Id.

  After a rehearing on both cases that was requested by the government, the Second Circuit adhered to its original rulings, noting that

What is present to a degree not adequately considered by the Commission is the combined effect of the aggregation of substantially overlapping enhancements' and the large increase in the sentencing range minimum at the higher end of the sentencing table.
Lauersen/Jackson, 362 F.3d at 164 (emphasis in original). With respect to Lauersen, the court held that the combination of the "financial institution" enhancement and the loss amount enhancements "will normally be an overlapping pair." Id. at 167. With respect to Jackson, the court noted that it saw no indication that the Sentencing Commission had taken into account how serious an effect would result from "the addition of his three overlapping enhancements (on top of his enhancement for the amount of loss) . . . " Id. at 164-65. In particular, the Court analyzed "what the effect of each of Jackson's three overlapping enhancements would have been if each one has been added without the other two." Id. at 165 n.10. For example, from his base offense level of 13, the 4-level adjustment for leadership of an extensive criminal activity, applied alone, would increase his sentencing range minimum by 18 months, whereas in combination with two two-level enhancements, it would increase the sentencing range minimum by 26 months, a difference of 44%. Id.

 Savin Faces Substantially Overlapping Enhancements

  Taking Savin's initial offense level computation together with his acknowledgment of the applicability of the financial institution enhancement, Savin's adjusted offense level is calculated as follows: a) a base offense level of six pursuant to U.S.S.G. § 2 Fl.1(a) for violations of 18 U.S.C. § 1343 and 1346; b) an increase of 13 levels under § 2 F1.1(b)(1)(N) for an amount of loss greater than $ 2,500,000 but less than $5,000,000; c) an increase of two levels because the offense involved more than minimum planning under § 2F1.1(b)(2) (A); d) an increase of two levels under § 3B1.3 for abuse of trust; e) an increase of four levels pursuant to § 2F1.1(b)(6)(b) (the financial institution enhancement) and f) a decrease of three levels for acceptance of responsibility under § 3El.1(a). See Savin, 2002 WL 31520472, at *4-5. With an adjusted offense level of 24 and a Criminal History Category of I, see id. at *5, Savin's Guideline sentencing range is 51 to 63 months' imprisonment.

  Savin argues that he is faced with three substantially overlapping enhancements triggered by the large sum of money involved: the 13-level loss amount enhancement, the 4-level "financial institution" enhancement and the two-level enhancement for more than minimal planning. The government does not contest the overlap of the loss amount enhancement with the financial institution enhancement, but argues that on rehearing the Second Circuit held that the loss amount enhancement does not overlap with the more than minimal planning enhancement. In Lauersen/Jackson, however, the court referred without comment to its holding in Jackson that "the overlapping enhancements for the amount of the loss, more than minimal planning, sophisticated means, and leadership of an extensive criminal activity" had a cumulative effect warranting downward departure. Lauersen/Jackson, 362 F.3d at 162-63. All three enhancements, therefore, are deemed to overlap substantially.

  The 13-level loss amount enhancement is deemed to overlap substantially with the 4-level financial institution enhancement. See Lauersen/Jackson, 362 F.3d at 167 (noting that these two enhancements "will normally be an overlapping pair."). Further, the 13-level loss amount enhancement also overlaps substantially with the two-level more than minimal planning enhancement because "[m]ost fraud schemes that obtain more than one half million dollars involve careful planning . . . " Jackson, 346 F.3d at 26.

 The Substantially Overlapping Enhancements Will Have a Significant Effect on Savin's Sentence

  Savin also argues that the second prong of the "cumulative effects" departure is satisfied because "the cumulative effect of [the] enhancements has a significant effect upon the applicable sentencing range." Lauersen, 348 F.3d at 344. Savin notes that the 4-level financial institution enhancement in combination with the other enhancements, results in a tri-fold increase in the sentencing range minimum compared with the effect of the enhancement when applied alone (18 months versus 6 months). As the Second Circuit noted,

a phenomenon of the Guidelines . . . is that any one enhancement increases the sentencing range by a far greater amount when the enhancement is combined with other enhancements than would occur if only one enhancement had occurred.
Jackson, 346 F.3d at 26; see also United States v. Teyer, 01 Cr. 21, 2004 WL 936793, at *16 (S.D.N.Y. Apr. 29, 2004) (noting the "cliff" effect in which a single factor can lead to dramatic changes in the prescribed sentence). The difference of 12 months as a result of the substantially overlapping enhancements is significant, particularly for a 69 year-old individual.

  The government argues that the "cumulative effects" departure is available only at the "higher end of the sentencing range," Lauersen/Jackson, 362 F.3d at 161, and that Savin therefore does not qualify for the departure. The government reads the Second Circuit's holding literally to mean that the departure is available only for the highest 18 (out of 36) sentencing ranges under Criminal History Category I,*fn2 which would place the line separating the higher and lower ends between offense levels 25 and 26, just above Savin's adjusted offense level of 24.

  There is no indication in the three opinions relating to the Cumulative effects" departure that the Second Circuit intended the term "higher end" to be read so literally.*fn3 The rationale behind the restriction is that only at the higher end will the cumulative effect of the overlapping enhancements have "a significant effect upon the applicable range." Lauersen, 348 F.3d at 344. The effect of a four-level enhancement on Lauersen's sentence was to add 30 months to his sentencing range minimum, and the effect of a four-level enhancement on Jackson's sentence was to add 26 months. While the effect of the four-level financial institution enhancement on Savin's sentence is not as high, the addition of 18 months to his sentencing range minimum is, nevertheless, significant. Savin is Entitled to a Four-Level "Cumulative Effects" Departure

  No defendant has yet been re-sentenced by a district court under the "cumulative effects" departure. The only guidance provided by the Second Circuit regarding the magnitude of such a departure is its holding that "the extent of the departure can only diminish, and not eliminate, the added punishment by the overlapping enhancements." Lauersen/Jackson, 362 F.3d at 167. However, "the extent of the departure . . . remain[s] within the discretion of the sentencing judge." Id.

  The government argues that Savin is entitled to, at most, a one-level departure because the "monetary overlap" of the loss amount and financial institution enhancements is $1 million because the financial institution enhancement is triggered by a loss of $1 million or more. Because Savin's conduct caused a loss of $4.5 million, the government reasons, the offense level overlap must correspond to the proportion of the "monetary overlap." Therefore, because $1 million is 22.2% of $4.5 million, only one of the four levels of enhancement results from the monetary overlap (22.2% of 4 = 0.9).

  The premise of the government's argument is that there are only two overlapping enhancements. Because it has been held that Savin is subject to three substantially overlapping enhancements, a departure of greater than one level is warranted. The effect of the more than two-level minimal planning enhancement, if applied alone, would have had no effect on Savin's sentence, as the sentencing range minimums corresponding to levels 6 and 8 are the same — zero to 6 months. The effect of the financial institution enhancement, if applied alone, would be to increase Savin's sentence by 6 months, from a zero-month minimum at offense level 6 to a six-month minimum at offense level 10. However, starting from Savin's adjusted offense level of 18 (including the 13-level loss amount adjustment, a two-level abuse of trust enhancement, and the three-level reduction for acceptance of responsibility), the effect of the two overlapping enhancements is to add 24 months to Savin's sentence, from a minimum of 27 months at offense level 18 to a minimum of 51 months at offense level 24.

  A four-level departure, which would reduce Savin's sentencing range minimum by 18 months would therefore diminish, but riot eliminate, the cumulative effect of the three substantially overlapping enhancements. Because there is "no indication that the Commission adequately considered how serious an effect on the sentencing range would result for a defendant" in Savin's position, Lauersen/Jackson, 362 F.3d at 164, Savin is granted a four-level downward departure, pursuant to U.S.S.G. § 5K2.0 and 18 U.S.C. § 3553(b)(1). Savin's adjusted offense level is therefore 20, corresponding to a sentencing range of 33 to 41 months. The Sentence

  Savin will be sentenced to a term of 33 months, for the reasons stated at the sentencing hearing on October 21, 2002. The conditions described in the initial sentencing opinion, see Savin, 2002 WL 31520472, at *5-6, will be imposed.

  This sentence is subject to modification at the sentencing hearing now set for May 27, 2004.

  It is so ordered.

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