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United States v. Gordon

United States Court of Appeals, First Circuit

March 29, 2017

UNITED STATES OF AMERICA, Appellee,
v.
MARCO GORDON, Defendant, Appellee.

         APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE [Hon. George Z. Singal, U.S. District Judge]

          Jonathan Shapiro, with whom Molly Campbell and Shapiro, Weissberg & Garin, LLP were on brief, for appellant.

          Renée M. Bunker, Assistant United States Attorney, with whom Thomas E. Delahanty II, United States Attorney, was on brief, for appellee.

          Before Lynch, Stahl, and Barron, Circuit Judges.

          LYNCH, Circuit Judge.

         This case, of first impression for this circuit, involves the interpretation of a sentencing guideline that is frequently used to enhance sentences for those convicted of drug-related crimes, see U.S.S.G. § 2D1.1(b)(15)(E), and is potentially applicable to a wide range of other offenses, see id. § 4B1.3.

         On July 7, 2015, Marco Gordon pled guilty to conspiracy to possess with intent to distribute, and possession with intent to distribute, more than 28 grams of cocaine base, see 21 U.S.C. §§ 846, 841(a)(1), and 841(b)(1)(B), for his role in a drug-trafficking organization that operated primarily in Portland, Maine from October 2013 to January 2015. He does not dispute that he held a leadership role in the illicit organization, which was responsible for trafficking approximately 839 grams of cocaine base during a fifteen-month period.

         Gordon appeals only his sentence of 132 months of imprisonment, arguing that the district court improperly applied a two-level enhancement -- for offenses committed "as part of a pattern of criminal conduct engaged in as a livelihood, " U.S.S.G. §§ 2D1.1(b)(15)(E), 4B1.3 -- both by misinterpreting the guideline and by making erroneous predicate findings of fact.

         In order to apply that criminal livelihood enhancement, the court needed to find that over a twelve-month period, Gordon "derived income" in excess of $14, 500[1] from drug trafficking and engaged in drug-trafficking as his "primary occupation." Id. § 4B1.3 app. n.2. We affirm Gordon's sentence because the district court did not commit legal error when it used Gordon's gross, rather than net, income derived from drug trafficking to determine that his income surpassed the $14, 500 threshold, nor did the court commit factual error when it concluded that drug trafficking was Gordon's primary occupation.

         I.

         On January 9, 2015, Gordon was arrested in an apartment in Portland, Maine in connection with a fifteen-month federal investigation into a drug-trafficking organization that had operated in "Michigan, Connecticut, and Portland, Maine, though the primary location was in Portland." During a search incident to Gordon's arrest, officers found $990 and 0.31 grams of cocaine base in his pockets, and they found an additional $3, 425.46 and 183.6 grams of cocaine base in the apartment. Gordon was indicted on January 29, 2015, along with four co-defendants, for his role in an interstate drug conspiracy.

         Gordon pled guilty on July 7, 2015 to possessing with the intent to distribute in excess of 28 grams of cocaine base, 21 U.S.C. § 841(a)(1), (b)(1)(B), and conspiring to do the same, id. § 846. Gordon does not dispute that the money and drugs seized during his arrest (with a street value of roughly $28, 935) belonged to him and that the conspiracy to which he belonged trafficked at least 671 grams of cocaine base (with a street value of roughly $89, 480) during the twelve months preceding his arrest.

         At a November 6, 2015 sentencing hearing, the district court calculated Gordon's Guidelines Sentencing Range ("GSR") to be 188 to 235 months. That GSR included a two-level enhancement, sought by the government, which applies when "[t]he defendant committed [the relevant] offense as part of a pattern of criminal conduct engaged in as a livelihood." U.S.S.G. §§ 2D1.1(b)(15)(E), 4B1.3. The court applied that enhancement over Gordon's objection but ultimately sentenced him to 132 months of imprisonment, which represented a 56-month downward variance from the low end of the resulting GSR. On November 18, 2015, Gordon appealed his sentence to this court, limiting his challenge to whether the district court erred in applying the criminal livelihood enhancement.

         The criminal livelihood enhancement applies where the government proves, by a preponderance of the evidence, that two conditions have been met: (1) the defendant committed the relevant offense as "part of a pattern of criminal conduct" and (2) the defendant was engaged in that conduct "as a livelihood." Id. §§ 2D1.1(b)(15)(E), 4B1.3. On appeal, Gordon argued only that the government had failed to meet its burden as to the second condition.

         The Guidelines further divide that second condition into two prongs. A defendant was engaged in a pattern of criminal conduct "as a livelihood" only if:

(A) the defendant derived income from the pattern of criminal conduct that in any twelve-month period exceeded 2, 000 times the then existing hourly minimum wage under federal law[, ] [meaning $14, 500 in the instant case]; and
(B) the totality of circumstances shows that such criminal conduct was the defendant's primary occupation in that twelve-month period (e.g., the defendant engaged in criminal conduct rather than regular, legitimate employment; or the defendant's legitimate employment was merely a front for the defendant's criminal conduct).

Id. § 4B1.3 app. n.2. Gordon argued on appeal, as he had before the district court, that the government had failed to meet its burden as to both prongs.

         As to the first prong, Gordon argued that the court had erred in finding that he had derived "income" in excess of $14, 500 from drug trafficking during the relevant time period because the court had considered his gross, rather than net, income, and that if the court had properly deducted the expenses related to his drug trafficking, it would have found that his earnings fell short of the threshold. Gordon also argued that the court had overestimated his income by twenty percent because it had not identified a twelve-month period to consider and had thus implicitly treated all of the income he had earned over the fifteen-month life of the conspiracy as if he had earned it in a year. As to the second prong, Gordon argued that the court had erred in finding that drug trafficking had been his primary occupation because his primary occupation had actually been his legitimate self-employment as a barber.

         The premise of Gordon's first argument -- that in order to apply the criminal livelihood enhancement, a district court must, as a matter of law, find that a defendant's net, rather than gross, income from criminal activity exceeded $14, 500 -- raised an issue of first impression in this circuit. Gordon made that argument, albeit for the first time, during the sentencing hearing. But the prosecution did not take a position on that argument. And the district court determined that Gordon's income met the $14, 500 threshold without explicitly stating "whether its finding was based on the net [or] gross[] approach." As a result, "we [were] unable to address [a] key issue[] on appeal, " and so we sought clarification from the district court as to what exactly it had decided. On December 12, 2016, this court issued an order remanding the case, requesting that the district court clarify its findings relevant to Gordon's first argument on appeal. We invited the district court to "take further evidence and make further findings" if necessary.

         On January 27, 2017, the district court issued an order in response to the remand clarifying that it had utilized the gross-income approach and reiterating its conclusion that, under that approach, the criminal livelihood enhancement applied.[2] See United States v. Gordon, No. 2:15-cr-27-GZS, 2017 WL 383349, at *2 (D. Me. Jan. 27, 2017). The court explained that the "derived income" language in § 4B1.3 app. n.2(A) allows a district court to use a defendant's gross income. It reasoned that if the Guidelines had meant to require a court to consider a defendant's net income, then they would have provided "specific guidance . . . regarding how to calculate net income for the many offenses covered by [the enhancement]." Id.

         The court also noted that the parties disagreed as to what constituted a "deductible expense" and as to what should be viewed more properly as a distribution of profits. Id. For example, the government argued that gross income should be used, but that if net income were used, only the amount Gordon had paid to acquire the cocaine base he sold could be netted out against his gross earnings. Id. Gordon, in contrast, argued that the court should also deduct compensation he had purportedly paid subordinate dealers to move product on his behalf, as well as the cost of two televisions and a futon that he had purportedly purchased for an associate in exchange for allowing Gordon to store cocaine base at the associate's apartment. Id. at *2-3.

         The court also pointed out that it is the government's burden to prove the application of a sentencing enhancement, United States v. Alphas, 785 F.3d 775, 784 (1st Cir. 2015), but that the government will "frequently have little evidence to offer" regarding the precise, idiosyncratic and potentially numerous expenses attendant to a criminal enterprise, "especially when those expenses are cash payments or cash purchases made with drug proceeds, " Gordon, 2017 WL 383349, at *3. "Thus, " the court concluded, "assuming [a district court] were required to make a net income finding . . ., it is not clear who [would] bear the burden of production for any deductible amounts." Id.

         Finally, the court held that even if it had not applied the criminal livelihood enhancement, and Gordon's GSR had been 151 to 188 months as a result, the court still would have varied downward and imposed the same 132-month sentence on Gordon. Id.

         On January 30, 2017, Gordon filed a notice of his intent to continue his appeal with this court in light of the district court's January 27 order. In his supplemental appellate brief, filed on February 17, 2017, Gordon renewed his claim that the district court had erred, as a matter of law, in calculating his derived income on a gross, rather than net, basis for purposes of the criminal livelihood enhancement. Of the other claims raised in Gordon's original appellate brief, which all pertained to purported factual errors underlying the court's application of the same enhancement, only Gordon's claim that the court had erred by finding that drug trafficking, rather than barbering, was his primary occupation during the relevant time period remains a live issue in this appeal.[3]

         II.

         A. Appeal from the District Court's Use of the Gross-Income Approach Under U.S.S.G. § 4B1.3 app. n.2(A)

         Gordon appeals from the district court's thoughtful holding that it was proper to apply § 4B1.3 app. n.2(A) of the Guidelines based on evidence of Gordon's gross income alone. Gordon argues that this was error, alleging that § 4B1.3 app. n.2(A) required the court to consider his net income.[4] The government denies that this was error but says that, if any error occurred, it was harmless in light of the district court's statement that it would have imposed the same 132-month sentence regardless of whether the criminal livelihood enhancement applied. See Gordon, 2017 WL 383349, at *3.

         We address first the question of whether there was any error at all in the district court's use of the gross-income approach, a recurring and logically antecedent question. Then we turn to the government's argument that, if there was any error, that error was harmless. For the reasons that follow, we hold that there was no error.

         The proper interpretation of a sentencing guideline is a question of law that we review de novo. United States v. Damon, 595 F.3d 395, 399 (1st Cir. 2010). We interpret a guideline "by applying familiar principles of statutory construction, " id. at 400, meaning we look to "its text, structure, context, and purpose[], " id. at 401.

         The guideline at issue provides that a court applying the criminal livelihood enhancement must find that, in any twelvemonth period, the defendant "derived income" from his criminal acts in excess of 2, 000 times the then existing hourly minimum wage under federal law. U.S.S.G. § 4B1.3 app. n.2(A). The plain meaning of "income" does not resolve the question of whether a defendant's earnings should be measured on a gross or net basis, as the term is susceptible to both readings. Compare Income, Black's Law Dictionary (10th ed. 2014) (defining "income" as "[t]he money . . . that one receives"), with Income, ...


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