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United States v. Smathers

United States Court of Appeals, Second Circuit

January 9, 2018

UNITED STATES OF AMERICA, Appellee,
v.
JASON SMATHERS, Defendant-Appellant.

          Argued: October 18, 2017

         Appeal from an order of the United States District Court for the Southern District of New York, Alvin K. Hellerstein, Judge, denying defendant's postsentence motion to reduce or eliminate his remaining restitution obligation by the amounts recovered by his crime victim in its civil litigation against other persons, see 18 U.S.C. §§ 3663A, 3664. The district court denied the motion on the ground that defendant did not show that those recoveries were for the same loss he caused or that the victim has been fully compensated for the loss he caused it. Defendant contends principally that the court erred in ruling that he had the burden of proving that the losses were the same, and in not concluding that the victim's recoveries reduced or eliminated defendant's restitution obligation. We conclude that the district court's ruling that defendant had the burden of proof on these issues was within the court's discretion and that there were no errors in the court's ruling.

          ANDREW THOMAS, Assistant United States Attorney, New York, New York (Joon H. Kim, Acting United States Attorney for the Southern District of New York, Michael Ferrara, Assistant United States Attorney, New York, New York, on the brief), for Appellee.

          SUSAN C. WOLFE, New York, New York, for Defendant-Appellant.

          Before: KEARSE, CABRANES, and WESLEY, Circuit Judges.

          KEARSE, CIRCUIT JUDGE

         Defendant Jason Smathers, who was convicted in 2005, following his plea of guilty, of conspiring, in violation of 18 U.S.C. § 371, to misappropriate and sell property of America Online ("AOL"), and was ordered to, inter alia, pay AOL restitution in the amount of $84, 000, appeals from a June 22, 2016 order of the United States District Court for the Southern District of New York, Alvin K. Hellerstein, Judge, denying his motion, made pro se, for a reduction of his remaining restitution obligation by amounts recovered by AOL in civil litigation against other persons. The district court ruled that Smathers failed to show that those amounts recovered by AOL were compensation for the same loss caused by Smathers or that AOL has been fully compensated for the loss caused by Smathers. On appeal, Smathers, represented by counsel, contends principally that the district court erred in imposing on him "the full burden" (Smathers brief on appeal at 26) of proving that AOL's recoveries were for the same loss caused by Smathers and that the court clearly erred in finding that the losses were not the same. He also complains that the district court denied his motion without a hearing. Concluding that his contentions lack merit, we affirm.

         I. BACKGROUND

         The record of Smathers's prosecution, United States v. Smathers, S.D.N.Y. No. 04CR1273, shows the following. In 2005, Smathers, represented by counsel, pleaded guilty to conspiring from about April 2003 through about April 2004, in violation of 18 U.S.C. § 371, to affect interstate commerce by relaying and retransmitting deceptive emails in violation of the CAN-SPAM Act, 18 U.S.C. § 1037, and to transmit in interstate commerce a stolen list of AOL customer names, having a value of $5, 000 or more, in violation of 18 U.S.C. § 2314. In furtherance of the conspiracy, Smathers, an employee of AOL, misappropriated an AOL customer list containing approximately 92 million screen names. Smathers sold that list ("the Smathers List") to Sean Dunaway for $28, 000; Dunaway sold that list to Braden Bournival; Bournival used it to send to AOL customers between three and seven billion unsolicited email advertisements (or "spam, " see The American Heritage Dictionary of the English Language at 1678 (5th ed. 2011) (defining "spam" as, inter alia, "[u]nsolicited email, often of a commercial nature, sent indiscriminately to multiple mailing lists, individuals, or newsgroups")). AOL estimated that the cost of processing those spam emails was about 10 cents per 1, 000 emails, amounting to $300, 000-$700, 000.

         Smathers was sentenced principally to 15 months' imprisonment, to be followed by three years of supervised release, and was ordered to pay restitution to AOL. In determining the amount of Smathers's restitution obligation under the Mandatory Victims Restitution Act ("MVRA"), see 18 U.S.C. §§ 3663A and 3664, the district court noted that Smathers's plea agreement stated that the loss to AOL was $300, 000; but the court declined to order Smathers to pay restitution in that amount because, inter alia, some portion was overhead rather than out-of-pocket expense, and it thought that ordering him to pay $300, 000 would give AOL a windfall. Instead, trebling the $28, 000 that Smathers had received for selling the AOL list, the court ordered Smathers to pay restitution in the amount of $84, 000. The judgment so ordered but stated that the "Total Loss" was "$300, 000." Judgment, August 17, 2005.

         A. Smathers's First Attempt To Reduce His Restitution Obligation

         In March 2007, Smathers's attorney sent a letter to the district court stating, inter alia, that AOL had commenced a civil suit, America Online, Inc. v. Hawke, 04-259-A (E.D. Va.) ("Hawke Litigation"), against Davis Wolfgang Hawke, Bournival (who had purchased the Smathers List from Dunaway), and others. (See Letter from Susan C. Wolfe to Honorable Alvin K. Hellerstein dated March 26, 2007 ("2007 Wolfe Letter"), at 3.) The letter stated that the Hawke Litigation docket indicated that AOL had reached an undisclosed settlement with Bournival and had obtained a $12, 834, 553.82 default judgment against Hawke and two others; and that "various internet news sources" stated that AOL had collected some $95, 000 and a Hummer vehicle in that litigation. (Id.) Smathers contended that the $95, 000 alone exceeded his entire restitution obligation (see 2007 Wolfe Letter at 3) and asked the court to determine the full amount of AOL's recoveries and to determine whether or to what extent his restitution obligation should be modified pursuant to 18 U.S.C. § 3664(j)(2).

         In response, the court gave Smathers "permission to file a motion for appropriate relief based on affidavits and competent proof." Order dated March 26, 2007 ("2007 Order"). No such motion was forthcoming.

         B. Smathers's Subsequent Requests for Reduction

         Eight years later, Smathers sent a pro se letter to the district court "request[ing] a status conference regarding the restitution ordered in []his case." (Letter from Jason Smathers to Honorable Alvin K. Hellerstein dated March 2, 2015 ("Smathers 2015 Letter"), at 1.) He stated that restitution payments had been made by Dunaway in Dunaway's criminal case and that payments had been made by Bournival in AOL's civil litigation--referred to in the 2007 Wolfe Letter. He stated that those payments were for the same loss that he had caused (see Smathers 2015 Letter at 1 n.1) and that he believed that "the restitution ordered in []his case" had therefore been "collected in full already through third party payments" (id. at 1).

         The district court responded that a status conference was not appropriate because there were no ongoing proceedings before the court. It stated that any request for relief should be made by motion, showing the court's jurisdiction and the reasons supporting the relief requested.

         Nearly a year later, Smathers brought his present pro se Motion To Compel Proper Enforcement of Restitution Order and Injunction, ("2016 Restitution Reduction Motion"), repeating his contention that the restitution payments made by Dunaway and the payment by Bournival in settlement of AOL's civil suit were for the same loss caused by Smathers and were sufficient in amount to extinguish Smathers's restitution obligation. No details were cited, and no affidavits or other evidentiary materials were submitted. Instead, Smathers argued that the government "should . . . have access" to the sealed documents in the AOL civil litigation, "should be in the position to determine all payments made for the same action and reduce the restitution amount by these third party payments, " and should be ordered to "reduce [Smathers's] restitution amount" by the amounts paid by Dunaway and Bournival. (Id. at 2; see id. at 3.)

         The district court ordered the government to respond to the motion and to "make timely appl[icatio]n . . . to unseal any relevant case files or ...


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