United States v. Ronald Snook

COFFEY, Circuit Judge,

dissenting.

I agree with the majority’s presentation of the facts at issue, and I concur with the majority’s decision to affirm Snook’s conviction. However, I cannot join the majority’s decision to affirm Snook’s sentence, because, notwithstanding the majority’s assertion to the contrary, I do not agree that Snook occupied a “position of trust” (as that term is used in the Guidelines) vis-a-vis the public. Thus, it would be entirely improper to apply the U.S.S.G. § 3B1.3 “abuse of public trust” enhancement against Snook in this case.

The district court enhanced Snook’s sentence pursuant to U.S.S.G. § 3B1.3, which provides for a two-level enhancement where a defendant abuses a “position of trust” that he occupies in relation to the victim of his crime. Section 3B1.3 provides, in relevant part:

If the defendant abused a position of public or private trust, or used a special skill, in a manner that significantly facilitated the commission or concealment of the offense, increase by 2 levels. This adjustment may not be employed if an abuse of trust or skill is included in the base offense level or specific offense characteristic.

As delineated in the commentary to the Guidelines, the phrase “position of trust” “refers to a position of public or private trust characterized by professional or managerial discretion (ie., substantial discretionary judgment that is ordinarily given considerable deference).” U.S.S.G. § 3B1.3 comment. (n.l). In explaining the proper application of a “position of trust” enhancement, the commentary goes on to set forth a number of examples of “abuse of trust,” including, “embezzlement of a client’s funds by an attorney serving as a guardian, a bank executive’s fraudulent loan scheme, or the criminal sexual abuse of a patient by a physician under the guise of an examination.” Id.

In the case before us, the trial judge found that Snook, as the Environmental Manager at a private petroleum refinery (Clark), held a “position of trust” vis-a-vis the public. 1 Moreover, the court conclud *447 ed that by violating the Clean Water Act (“CWA”) — a “health and regulatory statute” — Snook engaged in criminal activity that had a “potential direct physical effect on the general public ... such that ... the adjustment ... for violating a ... position of trust [wa]s appropriate.” Sent. Tr. at 19-20. This Court “review[s] the district court’s application of the enhancement de novo and review[s] the finding that [Snook] occupied such a position under the clearly erroneous standard.” United States v. Mabrook, 301 F.3d 503, 510 (7th Cir.2002).

As set forth under Section 3B1.3, the “abuse of trust” enhancement applies only where a defendant possessed the requisite level of discretion, and, further, where that discretion was “entrusted to the defendant by the victim.” United States v. Broderson, 67 F.3d 452, 456 (2d Cir.1995) (emphasis added). That is, the “position of trust” determination is assessed “from the perspective of the victim.” United States v. Hathcoat, 30 F.3d 913, 919 (7th Cir.1994). Moreover, recognizing the fiduciary nature of the “trust” relationships set forth as examples in the commentary' — i.e., attorney/client, bank executive/bank client, and doctor/patient relationships — courts have emphasized that, to qualify as a “position of trust,” “[t]he guideline enhancement requires more than a mere showing that the victim had confidence in the defendant. Something more akin to a fiduciary function is required.” United States v. Brunson, 54 F.3d 673, 678 (10th Cir.1995) (emphasis added); see, e.g., Mabrook, 301 F.3d at 510 (noting that a defendant’s fiduciary duty vis-á-vis the investors in his company placed him in a position of private trust). Thus the victim must have placed the defendant in a position where he or she is performing a “fiduciary function,” or exercising discretion over the victim’s affairs. See Varity Corp. v. Howe, 516 U.S. 489, 504 , 116 S.Ct. 1065 , 134 L.Ed.2d 130 (1996). Indeed, it is worth noting that “every example of an abuse of trust in the Commentary ... involves a victim entrusting an agent or employee with discretion.” Broderson, 67 F.3d at 456 .

Applying these principles to the instant case, it is clear that Snook did not occupy a “position of trust” vis-á-vis the public, for the simple reason that he did not serve in a fiduciary (or even quasi-fiduciary) capacity with respect to his victim, the public. One cannot be a fiduciary without first being placed in that position by the claimed beneficiary of the relationship. Lopacich v. Falk, 5 F.3d 210, 213 (7th Cir.1993) (“In order to establish evidence of a fiduciary relationship, the plaintiff must show [first] that she reposed confidence in the defendant .... ”). The public did not place Snook in the position of Environmental Manager, and thus “entrust” him to comply with the Clean Water Act’s reporting requirements. Snook was not a government employee, and thus could not be considered or classified as a public servant by nature of his employ *448 ment. Nor was he even a private employee subject to professional licensing requirements, and therefore entrusted to abide by certain standards in order to maintain the public’s trust in his profession (such as a physician or an attorney). Rather, Snook was a private employee, selected by Clark, and not the public, to monitor the corporation’s compliance with the Clean Water Act. And it was Clark, and not the public, who reposed its confidence in Snook such that a fiduciary relationship may have been created. To be sure, the public may have “trusted” Snook to obey applicable environmental regulations, as it “trusts” any citizen to abide by any law protecting matters in the public interest (such as drunk driving laws, speeding laws, reckless driving laws, anti-theft laws, and environmental protection laws, etc.). But the public did not entrust Snook (in the sense of placing a fiduciary obligation on Snook) with the duty of protecting its health and welfare interests in the environment; when Clark selected Snook to serve as its Environmental Manager, he did not take an oath of office or swear to abide by the provisions of the Clean Water Act and protect the public from pollutants in its water system. Thus Snook was certainly not acting in the capacity of an agent or employee of the general public. See Broderson, 67 F.3d at 456 .

The fact that the District’s regulatory regime involved an element of self-reporting duty on the part of Clark (and Snook, as Clark’s agent) does not change this result. Although' Snook may have been responsible for certifying Clark’s water quality reports to the District in accordance with the CWA, “whatever ‘trust’ [the public or the district] placed in [Snook] was based [entirely] on the explicit commands of [the CWA and related regulations].” Id. Thus, Snook had bare legal and statutory obligations to the public in general, as does any private citizen who files a tax return or drives a vehicle on public roadways, but nothing more.

If any party in this scenario was a fiduciary of the public’s environmental welfare and health safety, it was the District Office or district officer (not Clark or Snook), insofar as the District was ultimately responsible for ensuring Clark’s compliance with applicable regulations. The District (or the district officer in command) performed numerous unannounced inspections of Clark’s water discharge to ensure its compliance — anywhere from two to seven tests per year during the years 1993 through 1996. See Tr. at 209-210, 217-18. And, whenever Clark was found not to be in compliance, the District issued cease and desist orders to Clark to enforce compliance. Id. at 230. Indeed, the fact that the District monitored Clark’s discharge levels annually — some two to seven times per year — to assure compliance belies the Government’s claim that it was Clark, and not the District, who was trusted to comply with the CWA and attendant regulations.

The majority disagrees, arguing that because the District does not have the resources to fully monitor or ensure Clark’s compliance with the CWA, Clark (and Snook, as its officer) occupied a “position of trust” vis-a-vis the public. See Opinion at 445 (“Snook was given discretion to ... decide when to conduct [water] testing [and] although the District did periodically conduct its own testing, it was for the most part dependent on the data that Clark reported.”). But this is true of many regulatory frameworks — -the IRS, for example, certainly does not have enough resources to audit every defaulting and defrauding taxpayer annually. Thus, if we extend the majority’s reasoning to the IRS arena, then every corporate executive who certifies &• corporation’s tax return to the IRS occupies a “position of public *449 trust,” and thus may be subject to a Section 3B1.3 enhancement for filing a false tax return even though he has every reason to believe his client gave him accurate information. See Broderson, 67 F.3d at 455 (“[t]he government’s theory seems so [expansive and] far reaching that it might cause virtually anyone who is commanded by statute to make an accurate report to the government to be subject to a Section 3B1.3 enhancement .... [including] taxpayers who file false tax returns .... We believe that it is fairly obvious that the Sentencing Commission harbored no [such] intent that the enhancement be so sweeping.”).

Certainly, this would be an absurd result, for a corporate officer who is a private employee of a private corporation, is not a “fiduciary” or agent of the public (even though his fraudulent reporting may do significant harm to the public by imposing a heavier burden on other taxpayers). Equally absurd is the notion that a research scientist who discovers a wonder drug that is approved by the Food and Drug Administration (“FDA”), but is later discovered to have dangerous side effects, could be subject to a Section 3B1.3 “position of public trust” enhancement. Under the majority’s expansive reading, such a scientist who may have negligently performed his research, would have abused a “position of public trust” in reporting his findings to the FDA, even though the FDA is the entity ultimately responsible for ensuring that the public is safe from dangerous pharmaceuticals.

Seeking to avoid this extension of their logic, the majority would limit application of the public trust enhancement to criminal activities that implicate issues of “public health.” However, it is unclear on what basis the majority makes this distinction, for no “health and welfare” distinction is to be found anywhere in the text of the Sentencing Guidelines themselves. 2 Indeed, nothing in the Sentencing Guidelines suggests that the public trust enhancement should apply in a different manner when issues of health and safety are concerned — and yet that is the exact distinction the majority reads into the Guidelines in the instant opinion. See Opinion at 9-10 (noting that the “public trust enhancement” would not apply to ordinary private citizens who failed to abide by self-reporting requirements (such as taxpayers), but that it does apply to citizens such as Snook because Snook violated “regulations [that] apply to matters that directly and significantly affect the public’s health and safety”).

Moreover, save for the First Circuit’s opinion in United States v. Gonzalez-Alva *450 rez, 277 F.3d 73, 81-82 (1st Cir.2002), no other circuit court (including the Seventh Circuit) has extended the public trust enhancement to private individuals who work in industries that are regulated to protect the public health but this is exactly what the majority has chosen to do by announcing the “public health” distinction it sets forth today. In fact, the Ninth Circuit expressly rejected such a distinction in United States v. Technic Services, Inc., 314 F.3d 1031 (9th Cir.2002), noting that, while the importance of health and safety laws may “heighten the amount of interest the public has in [citizens abiding by such laws],” such fact alone “do[es] not [establish] the relational kind of interest that is required to find a position of public trust ” under the Guidelines. Technic Services, 314 F.3d at 1050 (emphasis added).

Indeed, the position of trust inquiry focuses not on the nature of the statute violated by the defendant, but rather on whether or not a “ ‘fiduciary or personal trust relationship exist[ed]’ with [the victim], and [whether] the defendant t[ook] advantage of the relationship to perpetrate or conceal the offense.’ ” United States v. Caplinger, 339 F.3d 226, 237 (4th Cir.2003) (quoting United States v. Koehn, 74 F.3d 199, 201 (10th Cir.1996)). Thus, for a defendant to have occupied a position of trust with the public, he must have worked as an agent or employee of the government, or held some other fiduciary-type position vis-á-vis the government or the public, and this was not the case in the factual situation before us. 3 See, e.g., United States v. Kuhn, 345 F.3d 431, 437 (6th Cir.2003) (holding that the Superintendent of a city’s water treatment plant held a position of public trust because he was a “government employee, charged with the safe and efficient operation of a wastewater treatment operation”); Technic Services, 314 F.3d at 1050 (concluding that the secretary of a government contractor in charge of asbestos clean-up did not hold a position of public trust, because he had “no trust relationship with the government by virtue of government employment; nor was he a public officer with a ‘special’ or quasi-fiduciary relationship to particular members of the public because of duties to protect their health; nor did he hold a position in which the public directly delegates duties and places the public welfare in the incumbent’s hands”); United States v. White, 270 F.3d 356, 372-73 (6th Cir.2001) (holding that an employee of the local Water District held a position of trust vis-á-vis the public, because customers of the Water District “granted the District substantial discretion ... as to how to provide [their drinking water]” and that such “quasi-fiduciary trust relationship ... [was] imput[able]” to the District employee); Broderson, 67 F.3d at 452 (holding that employee of government contractor did not occupy position of trust visa-vis the government, for in his negotiations with the government, he was bound not by fiduciary obligations, but by the Truth in Negotiations Act and the Federal Acquisition Regulations). But see Gonzalez-Alvarez, 277 F.3d at 81 (concluding that a dairy farmer held a position of *451 public trust, insofar as the public “was entitled to have diary farmers such as [defendant] provide milk ... compliant with all FDA and ORIL regulations”). And, pertinent to the instant case, “statutory reporting requirements do not create a position of trust [or fiduciary obligation] relative to a victim of the crime.” United States v. Garrison, 133 F.3d 831, 840 (11th Cir.1998).

No matter how egregious a defendant’s conduct, Section 3B1.3’s abuse of trust enhancement may not be applied against him unless he occupied a position of trust vis-a-vis the victim, and abused that position of trust to facilitate his crime. In the factual situation presented to us, the fact that Snook was not employed by the government (but, rather, a private oil refinery), together with the fact that Snook’s environmental reports submitted to the District were “monitored” by the District through random sampling (some two to seven times per year) reveals that Snook did not have a fiduciary or personal trust relationship with the victim, the public (or the victim’s fiduciary, the District). Thus, the Section 3B1.3 public trust enhancement does not apply. For this reason, the sentencing court’s application of the public trust enhancement to Snook was clearly erroneous; I would reverse the imposed sentence and remand for resentencing.

. At sentencing, the court used the phrases "position of private trust” and "position of public trust” interchangeably, and in fact, at one point, purported to "overrule the defendant’s objection to the use of ... [the Section] 3B1.3 [enhancement for violation of] position of private trust.” Sent. Tr. at 20. Elsewhere in its oral ruling, however, the court made *447 clear that its application of the Section 3B1.3 enhancement was based upon Snook’s violation of a position of public trust, noting that the CWA was “a statute that [wa]s uniquely a health and regulatory statute, [and that Snook's violation thereof presented] a potential direct physical effect on the public and the public that is trying to be served by the MWKD." Id. at 19-20. Where, as here, the victim of the defendant's criminal activity was the general public, the Section 3B1.3 enhancement applies, if at all, if the defendant occupies a position of trust vis-a-vis the public. See United States v. White, 270 F.3d 356, 371 (6th Cir.2001) ("The abuse-of-trust enhancement may only be applied where the defendant abused a position of trust with the victim of his charged conduct.”) Thus, as the majority has done, I will assume the district court applied the enhancement on the basis of Snook’s alleged violation of a position of public trust.

. Curiously, the majority cites United States v. White, 270 F.3d 356, 372-73 (6th Cir.2001) in support of the distinction between reporting crimes concerning “public health” (where the enhancement is applicable) and all other reporting crimes (such as filing a false IRS return). Although the White Court did find an abuse of public trust where the defendant had committed an environmental wrong, White is distinguishable from the instant case, in that it involved the environmental wrongdoings of an officer of a local Water District— a governmental entity, and not a private corporation — -who was on the public's payroll and clearly had a duty to the public. That is, the Sixth Circuit concluded that the defendant occupied a position of public trust because he, a public servant, was "charg[ed] [with the control of the Water District’s] water purification efforts with apparently little or no oversight.” Id. at 372 . Thus, the Court "imputed” the "quasi-fiduciary trust relationship between the District and its customers” to White. Id. at 373 .

In this case, by contrast, Clark did not serve the general public, insofar as it was a private oil refinery and not a governmental water provider. Thus, there exists no quasi-fiduciary relationship between Clark and the public that may be imputed to Clark's employees (including Snook).

. Notably, the First Circuit, in Gonzalez-Alvarez, 277 F.3d 73 (1st Cir.2002), is the only court that has ever found that the "abuse of public trust” enhancement applies to a wholly private employee whose profession was not regulated by professional licensing requirements. Until Gonzalez-Alvarez , the broadest application of the enhancement was to beneficiaries of government contracts, see, e.g., United States v. Velez, 185 F.3d 1048 (9th Cir.1999) (private immigration consultant who was given favored status under a statutory grant when submitting applications to the Immigration and Naturalization Service), physicians, see, e.g., United States v. Rutgard, 116 F.3d 1270 (9th Cir.1997), and attorneys, see, e.g., United States v. Hemmingson, 157 F.3d 347 (5th Cir.1998).