United States v. Shawn Hughes

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 10, 2015 Decided February 23, 2016

No. 13-3073

UNITED STATES OF AMERICA,

APPELLEE

v.

SHAWN HUGHES,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 1:09-cr-00240-1)

Gregory S. Smith, appointed by the court, argued the

cause and filed the briefs for appellant.

Christopher R. Howland, Assistant U.S. Attorney, argued

the cause for appellee. With him on the brief was Vincent H.

Cohen Jr., Acting U.S. Attorney, and Elizabeth Trosman and

Oliver W. McDaniel, Assistant U.S. Attorneys.

Before: BROWN and KAVANAUGH, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

WILLIAMS.

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Concurring opinion filed by Circuit Judge BROWN.

WILLIAMS, Senior Circuit Judge: Shawn Hughes’s

managers at Blackhawk, Inc., a government contractor for

security guard services, told her to certify that Blackhawk

guards had received training that they had not in fact received,

thereby enabling Blackhawk to charge more for each guard’s

services. Relying primarily on false training records from DB

Training Services, Hughes complied. On October 29, 2009

she pleaded guilty to making false statements to government

authorities, in violation of 18 U.S.C. § 1001(a)(2).

On December 20, 2011 the district court sentenced

Hughes to 30 days in prison and 24 months of supervised

release. More importantly, the court’s sentencing judgment

made Hughes and her co-defendant Douglas Brown, the

owner of DB Training, jointly and severally liable for

$442,330 in restitution. But, critically, the district court also

expressed a clear intention that the actual restitution amount

should be much smaller, perhaps as little as $0. A federal

court had already entered judgment against Blackhawk, Inc.

for more than $1 million. And the district court said, in

sentencing Hughes, that she would not be on the hook at all if

Blackhawk paid its fine. Even in the absence of such a

payment, Hughes would only have to pay “at a rate of not less

than $50 each month.” Transcript of Sentence at 38-40.

Hughes did not appeal, presumably in the entirely logical

belief that the sentence required her to pay restitution of only

$50 each month—if any.

Then her ordeal began.

In early 2013 Hughes found out that the Treasury

Department had seized tax refunds due her amounting to

$10,159. The Department had purported to act under the

Treasury Offset Program (“TOP”), 31 U.S.C. §§ 3716 &

3

3720A, which authorizes the government, when it owes a

person payment, to offset the amounts otherwise due with any

“past-due, legally enforceable debt” to the government by

withholding the payments. Because of her disqualification

from work in security services (which reduced her income and

largely explains her entitlement to a tax refund), Hughes was

in precarious economic circumstances even before the tax

seizure, with her home already on the verge of foreclosure.

On February 22, 2013 Hughes filed a Motion for

Clarification or Modification of Supervised Release in the

sentencing court, asking that the tax refunds be returned and

future seizures stopped. Between April 23 and July 18, 2013,

the court held four hearings on the matter. Simultaneously

with the first hearing, the government filed a “Notice of

Restitution Payments and Accounting,” which indicated that

Hughes had in effect contributed over $11,000 in restitution

payments (including the TOP offset), and that Douglas Brown

had paid $500. The Notice also indicated that not a cent had

been received from Blackhawk, that the government’s default

judgment against it was exempt from bankruptcy discharge,

and that the government “continue[d] to search for assets in

satisfaction of this judgment.” The Notice made no reference,

however, to the assets in the Blackhawk bankruptcy estate, the

status of the government’s claims to those assets, government

proceedings if any against principals or shareholders of

Blackhawk, or any pursuit of Brown, DB Training or their

assets.

At the first hearing, the court vacated Hughes’s sentence,

stating that it had not anticipated or intended that Hughes be

subject to such a harsh sentence. Transcript of Motion

Hearing, Apr. 23, 2013, at 13. At the second and third

hearings, the court entertained further arguments about the

resentencing. At the fourth hearing, the court reimposed its

original sentence, saying that it had no authority to modify

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Hughes’s sentence. The court did not order the government to

return Hughes’s tax refunds or stop withholding future

government payments otherwise due to Hughes.

The case poses two issues for us. First, should the district

court have recognized and corrected a clerical error in its

judgment? We hold that the sentence manifested such an

error, which the district court should have corrected. Second,

did the district court correctly refuse to order the return to

Hughes of the funds seized by Treasury? In light of the

necessary corrections in the sentence, we hold that the court’s

refusal to remedy the TOP collection was error, and we

remand for the court to require the government to return

Hughes’s tax refunds and to cease withholding payments.

* * *

Hughes argues, correctly, that the district court should

have applied Rule 36 of the Federal Rules of Criminal

Procedure, under which a “court may at any time correct a

clerical error in a judgment, order, or other part of the record,

or correct an error in the record arising from oversight or

omission.” In interpreting Rule 36, we have said that a court

is bound by what it “plainly intended” and cannot modify a

“sentence on the basis that it was unlawfully imposed.”

United States v. Arrington, 763 F.3d 17, 25 (D.C. Cir. 2014).

Here there are clerical errors correctible under Rule 36

because the judgment did not reflect what was “plainly

intended.” First, the oral record says that “the balance of any

restitution [is] owed at a rate of not less than $50 each

month,” and the written judgment has similar language. (The

oral recitations control over the written ones, United States v.

Lewis, 626 F.2d 940, 953 (D.C. Cir. 1980), but here there are

no meaningful differences between the two.) That statement,

however, must mean that a rate of not less or more than $50

each month was required. Otherwise, given the wide range

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between $50 and $440,000, the judgment would be virtually

meaningless. (Of course, the court can still adjust its payment

schedule if the defendant’s economic circumstances change.

18 U.S.C. § 3572(d)(3).) The intent to limit the payment to

$50 a month is especially clear in light of the court’s plain

expression of intent that the Blackhawk fine could offset the

entirety of Hughes’s restitution.

Second, the district court said “that payment of restitution

shall begin after the adjustment is figured where the fine for

[Blackhawk] will be applied,” and later added that Hughes

was to pay “the balance of any restitution owed at a rate of not

less than $50 each month . . . if it turns out that . . . there is an

amount outstanding that [Hughes] owe[s]” after Blackhawk’s

fine is subtracted. Transcript of Sentence at 38-40. Although

the wording may be inartful, the only reasonable meaning that

can be assigned these words is that payment is due only after

such time as Blackhawk’s contribution should be determined.

True, in the oral rendition of the sentence the court said at one

point that the “restitution [is] immediately payable,” but this

boilerplate language is controlled by the specific and repeated

references to payments beginning only after the Blackhawk

payment has been subtracted. Transcript of Sentence, Dec.

20, 2011, at 38. A correction under Rule 36 removes the

confusion, and we remand to the district court to make the

correction.

We now turn to whether the district court erred in

declining to order the government to return to Hughes the

funds seized under the Tax Offset Program. The government

argues that Hughes is barred by her alleged failure to exhaust

administrative remedies, and that in any event any judicial

remedy would require a separate civil suit (rather than simply

continuing in the current proceedings). As to the alleged

failure to exhaust, the government conspicuously fails to

identify any administrative remedies available to Hughes after

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Treasury began making deductions. Further, even assuming

an available administrative remedy, § 10(c) of the

Administrative Procedure Act, 5 U.S.C. § 704, imposes no

prerequisite of administrative exhaustion unless it is

“expressly required by statute or agency rule.” Darby v.

Cisneros, 509 U.S. 137, 143 (1993). The government points

to no statute or rule expressly imposing any such requirement.

That leaves the government’s theory that Hughes’s

motion in criminal proceedings was inadequate for securing

an order compelling return of funds seized under TOP or for

halting any further seizures; such relief could come, it says,

only in a new civil suit. Appellee’s Br. 44 n.18. The APA

generally provides a right of review, 5 U.S.C. § 702, and goes

on to specify the form of the proceeding: absent some specific

statutory requirement, which is lacking in this case, “any

applicable form of legal action, including actions for

declaratory judgments or writs of prohibitory or mandatory

injunction or habeas corpus, in a court of competent

jurisdiction,” is an acceptable “form of proceeding for judicial

review,” id. § 703. It is undisputed that the district court is a

“court of competent jurisdiction.”

The only remaining question then for determining

whether judicial review was appropriate here is whether

Hughes’s Motion for Clarification or Modification of

Supervised Release as part of a criminal post-sentencing

hearing is an “applicable form of legal action.” At least under

these circumstances, where agency action threatens to thwart

the proper execution of the collection of restitution ordered by

a district court criminal sentence, and where the Department

of Justice’s purported readings of the sentence have triggered

the actions of Treasury (the overseer of TOP), see 31 U.S.C.

§ 3720A(a); U.S. Department of Justice, Notice of Intent to

Offset, Jan. 31, 2012, it is hard to see why a motion in the

sentencing court should not be an “applicable form of legal

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action.” Indeed, federal courts already have the authority to

issue mandamus “in aid of their . . . jurisdictions,” 28 U.S.C.

§ 1651(a), an authority that includes power “to issue such

commands under [§ 1651] as may be necessary or appropriate

to effectuate and prevent the frustration of orders [they have]

previously issued,” United States v. New York Telephone

Company, 434 U.S. 159, 172 (1977). The power reaches even

“persons who, though not parties to the original action or

engaged in wrongdoing, are in a position to frustrate the

implementation of a court order or the proper administration

of justice” and “who have not taken any affirmative action to

hinder justice.” Id. at 174.

The government’s thinly-supported assertion that

“[d]efendants routinely bring civil actions of this nature,”

Appellee’s Br. 44 n.18, is irrelevant, given the absence of any

bar under the APA or elsewhere. The government itself has

used motions in a sentencing court to seek judicial approval of

wrapping a defendant’s restitution obligations into TOP.

United States v. Beulke, 892 F. Supp. 2d 1176, 1178, 1186-88

(D.S.D. 2012).

This takes us to the merits of Hughes’s objection to the

TOP offset. The statute applies to “a past-due, legally

enforceable debt” from a person to a federal agency. 31

U.S.C. § 3720A(a). The key question then is whether

Hughes’s restitution obligation qualifies as such (or qualified

at the time of the seizure). Treasury regulations (whose

validity we assume arguendo) say that debt is “[d]elinquent or

[equivalently] past-due . . . [when] a debt has not been paid by

the date specified in the [creditor] agency’s initial written

demand for payment, or applicable agreement or instrument

(including a post-delinquency payment agreement), unless

other payment arrangements satisfactory to the creditor

agency have been made.” 31 C.F.R. § 285.5(b) (2009). As

Hughes is obliged under the corrected sentence to start paying

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money only when the Blackhawk fine is resolved, and, in any

case, would only be delinquent if she paid less than $50 per

month, we remand to the district court to direct the

government to return Hughes’s tax refunds and to stop its

purported application of TOP so long as Hughes is not

delinquent under Treasury regulations viewed in light of the

corrected sentence.

So ordered.

BROWN, concurring in part and concurring in the

judgment. I join the court’s opinion to the extent it authorizes

Rule 36 clarifications. I also agree the determination of when

Ms. Hughes’ debt became due may affect the validity of the

Department of Justice’s referral to the Treasury Offset

Program. See United States v. Martinez, 2015 WL 9009626,

at *1, *6 (10th Cir. 2015) (“[T]he statutory scheme directs the

district court, not the government, to direct how and when the

defendant is to satisfy a restitution order. . . . The government

[can]not usurp the district court’s role by enforcing payments

not yet due under the court-ordered payment schedule.”).

However, I do not join the Court’s discussion of the

viability of an APA challenge, in a criminal case, of the TOP

program’s alleged overreach. Too many questions remain

about the interplay between TOP and several criminal

restitution statutes, about whether Ms. Hughes received

adequate notice, and about whether an administrative

challenge to a TOP referral can be waived. These issues were

not squarely presented nor were they sufficiently briefed to

permit any confident assessment.

I am, nevertheless, completely in sympathy with the

Court’s bold response. This is a case in which the

government behaved badly and—even when the unpalatable

implications of their actions became evident—exhibited

neither remorse nor gallantry. Politics is a form of violence;

and, in democracies, the monopoly on force is accorded to the

electoral victors. Bureaucratic institutions are justified by

their efficiency. That efficiency is enhanced because they

may invoke the threat of force to deter non-compliance. Even

so, an expectation remains that the resort to force will be

neither gratuitous nor grossly disproportionate.

Ms. Hughes committed a crime. She acknowledged her

culpability and accepted responsibility. She was neither the

instigator of the fraudulent scheme nor its main beneficiary.

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That dubious distinction went to her corporate employer—

Blackhawk. Ms. Hughes, who had lost her main source of

income and was on the verge of having her home foreclosed,

nevertheless began making her $50 a month payments. But

DOJ wasted no time referring her alleged debt to the

TOP program which immediately scooped up an $11,000 tax

refund—about the only cash available to Ms. Hughes. Paying

off this $442,000 debt at $50 per month would take nearly

740 years; seizure of her tax refund may have reduced the

reckoning by about 20 years. If the referral stands, Ms.

Hughes’ future tax refunds and even her Social Security

payments may also be seized by the government in

satisfaction of her restitutionary debt. The point is, no matter

how much suffering the government inflicts on Ms. Hughes,

the Department will never recover the full amount it is

allegedly owed. Yet there is no evidence the government ever

sought to criminally prosecute Blackhawk—the most culpable

party—a corporation that, so far as this record shows, has yet

to pay a cent. There is something very wrong with this

picture—so wrong Stevie Wonder could see the flaw from a

phone booth in Chicago. The fact that the government cannot

is deeply disturbing.