Eleventh Circuit Reverses District Court’s Sua Sponte Termination of the Defendant’s Restitution Obligation

In United States v. Puentes, No. 14-13587, 2015 WL 5781270 (11th Cir. Oct. 5, 2015), the Eleventh Circuit addressed “whether the Mandatory Victims Restitution Act gives a district court the authority to eliminate a defendant’s mandatory restitution obligation in exchange for the defendant’s substantial assistance under [Federal Rule of Criminal Procedure] 35(b).” (“MVRA”) 18 U.S.C. §§ 3663A–3664 (1996). The defendant, Puentes, entered into a plea agreement for his role in a fraudulent scheme designed to bilk lending institutions out of mortgage loan funds. In addition to a prison sentence, Puentes was ordered to pay $4.45 million in restitution, for which he was “jointly and severally liable with his co-conspirators.” Subsequently, Puentes served as a government witness, prompting the government to file a motion under Rule 35(b) seeking to reduce Puentes’s term of imprisonment. In its order, the district court not only reduced sentencing, but also terminated the defendant’s restitution obligation sua sponte, despite the fact that the MVRA makes restitution mandatory for fraud. The district court justified this termination by premising its decision on “joint and several liability grounds,” thereby concluding that the MVRA did not apply.

In its decision, the Eleventh Circuit articulated three reasons why the MVRA was in fact implicated. First, rather than simply providing for restitution in general, the language of the statute provided that Puentes himself must compensate his victims. Second, the MVRA contemplated joint and several liability for co-defendants, but did not contemplate exempting one defendant entirely. Finally, reducing the number of defendants required to pay, shifted the risk of absorbing a defendant’s inability to satisfy a judgment from the co-defendants to the innocent plaintiffs, an outcome contrary to the principle undergirding joint and several liability.

The court of appeals then proceeded to address whether the MVRA gave the district court the authority to make such a termination. The court noted that the overall purpose of the MVRA was to eliminate district court discretion for restitution and that such a termination would frustrate this purpose. Further, the MVRA stated that it was to apply “notwithstanding any other provisions of law.” Since the statute is more explicit than Rule 35 and was enacted after Rule 35, the court found that this language evinced Congress’s intent that the MVRA trump any Rule 35 considerations.

Importantly, Rule 35 was amended in 1991 to specifically delineate two justifications for altering a sentence—a “correction” of an erroneous sentence and a “reduction” of an otherwise lawful sentence for an inmate’s substantial assistance. Prior to the amendment, the second prong of the rule was entitled “Correction of Sentence for Changed Circumstances”—in the amendment, “reduction” was substituted for “correction” to reflect the lawfulness of the underlying sentence. The MVRA enumerates exceptions that permit a modification of a mandatory restitution order, including a modification pursuant to a “correction” of sentence under Rule 35. In light of Rule 35’s legislative history, the Eleventh Circuit found significance in the inclusion of “correction” but the absence of “reduction” in the provision, and refused to find that the MVRA permitted a modification of a restitution obligation in light of a “reduction” under Rule 35. The court reasoned that Congress undoubtedly accounted for this distinction in drafting the MVRA. Since the other circumstances permitting modification were similarly inapplicable, the court concluded that the termination of Puentes’s restitution obligation was unlawful, and remanded the case with instructions to reinstate the restitution obligation.

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