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February 12, 2016
  U.S. v. Snowden - Tenth Circuit
Case Name: U.S. v. Snowden

Headline: Tenth Circuit Holds Possible $1.5 million Error in Sentencing Calculations Was Harmless

Area of Law: Criminal Procedure, Sentencing

Issue Presented: Whether the district court erred in calculating the sentencing enhancement based on a calculation of loss that was the sum of the pecuniary costs and the costs to develop a proprietary database. And if so, whether the error was harmless.

Brief Summary:

Defendant pleaded guilty to unlawfully obtaining information from a protected computer and to unlawfully intercepting emails. The district court found that because these crimes caused over one million dollars in losses, a 16-level sentencing enhancement was appropriate. The resulting guideline range was 41-51 months in prison, though the court varied downward and imposed a 30-month sentence.

Defendant appealed, arguing that the loss amount mistakenly included the $1.5 million cost to develop the proprietary database he hacked into and, consequently, the sentencing range was too high. The Tenth Circuit, without determining whether the loss calculation was improper, held that any perceived error was harmless because the district court unequivocally stated it would still impose a 30-month sentence even under a lower guideline range. The Tenth Circuit affirmed.

Extended Summary:

Since 2005, Onyx, M.D., Inc., a physician-staffing agency, developed a proprietary database. Defendant was a former employee who, a year after being terminated, obtained an executive's password and copied information out of the database to help him compete with Onyx. Defendant also intercepted over 20,000 emails to and from four Onyx executives. Onyx eventually noticed the hack, which the FBI traced to Defendant's address. Defendant pleaded guilty to unlawfully obtaining information from a protected computer and to unlawfully intercepting emails.

At sentencing, the district court determined that Onyx's losses were 1) $25,000 monetary harm in responding to the hack, and 2) $1.5 million in costs to develop the database. This resulted in a 16-level increase and guideline range of 41-51 months.

Defendant argued that the proper loss amount was $25,000, which would call for a 4-level increase and guideline range of 8-14 months. The district court disagreed and varied downward to impose a 30-month sentence, stating that even under a lower range it would impose a 30-month sentence with an upward variance. Defendant appealed.

First, the Tenth Circuit considered whether the district court properly calculated Onyx's losses. The Tenth Circuit looked to the guidelines commentary, which defined actual loss as the reasonably foreseeable pecuniary harm (meaning monetary harm) resulting from the offense. See USSG § 2B1.1 cmt. n.3(A)(i), (iii).

The Tenth Circuit held that the $1.5 million development cost was not adequately tied to any actual loss suffered by Onyx. Interpreting the commentary to require a district court to not only take into account the cost of developing trade secrets, but to substitute the development cost for the loss calculation contradicts the guideline's emphasis on actual losses. Without explicitly reversing, the Tenth Circuit stated its reluctance to affirm the offense level and corresponding guideline range.

Second, the Tenth Circuit held that any alleged error in the loss calculation was harmless. In the rare situation where there is harmless error in the loss calculation, it is because the error did not affect the sentence imposed by the district court. See U.S. v. Glover, 413 F.3d 1206, 1210 (10th Cir.2005). Here, the sentence was not affected because the district court clearly expressed that it would impose a 30-month sentence as an upward variance even if the correct range was lower.

Moreover, the Tenth Circuit held that the district court properly gave more than a boiler plate or perfunctory explanation for why it would exercise an upward variance. See U.S. v. Pena-Hermosillo, 522 F.3d 1108, 1117-18 (10th Cir.2008). The court relied on specific factors from 18 U.S.C. § 3553(a). Since the district court is not otherwise required to sentence within the guideline range, see U.S. v. Booker, 543 U.S. 220 (2005), a remand was inappropriate. The Tenth Circuit held that any error was harmless and affirmed the district court's sentence.

To read the full opinion, please visit: https://www.ca10.uscourts.gov/opinions/15/15-1107.pdf

Panel: Tymkovich, Hartz, and Baldock

Date of Issued Opinion: November 27, 2015

Docket Number: No. 15-1107

Decided: The Tenth Circuit affirmed the sentence imposed by the district court.

Case Alert Author: Veronica C. Gonzales

Counsel:

O. Dean Sanderford, Assistant Federal Public Defender (Virginia L. Grady, Federal Public Defender, with him on the briefs), Denver, Colorado, for Defendant - Appellant.

Paul Farley, Assistant United States Attorney (John F. Walsh, United States Attorney, with him on the brief), Denver, Colorado, for Plaintiff - Appellee.

Author of Opinion: Hon. Harris L. Hartz

Case Alert Circuit Supervisor: Dawinder S. Sidhu

    Posted By: Veronica Gonzales @ 02/12/2016 12:08 AM     10th Circuit  

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