USA v. David Foley - Court of Appeals Docket 14-10055 Doc 22-1

No.
14-10055, 14-10056
IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,
v.
DAVID FOLEY,
Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of California
District Court Nos. 09-00670, 11-00554

APPELLANTS OPENING BRIEF

DENNIS P. RIORDAN (SBN 69320)
dennis@riordan-horgan.com
DONALD M. HORGAN (SBN 121547)
don@riordan-horgan.com
RIORDAN & HORGAN
523 Octavia Street
San Francisco, CA 94102
Telephone: (415) 431-3472
Facsimile: (415) 552-2703
Ted Sampsell Jones
William Mitchell College of Law
875 Summit Avenue
St. Paul, MN 55105
Telephone: (651) 290-6348
Attorneys for Defendant-Appellant
DAVID FOLEY
Case: 14-10055 08/18/2014 ID: 9209244 DktEntry: 22-1 Page: 1 of 45
TABLE OF CONTENTS
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STATEMENT OF JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
BAIL STATUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
STATEMENT OF THE CASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A. Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. The Mail Fraud Indictment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C. The Bank Fraud Indictment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
D. Plea Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. Factual Admissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. Sentencing Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
E. Sentencing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1. The Parties Arguments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2. The District Courts Ruling. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SUMMARY OF ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-i-
Table of Contents continued
I. THE DISTRICT COURT ERRED BY IMPOSING A SENTENCE
BASED ON LOSS TO A PARTY WHO WAS NOT A VICTIM
OF THE OFFENSE TO WHICH THE DEFENDANT
PLEADED GUILTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
A. The Shifting Theories of Fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
B. Convergence Doctrine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
C. Victims Under the Guidelines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
D. Implicit Admission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
II. THE DISTRICT COURT ERRED BY FINDING THE LOSS
AMOUNT BASED ON A PREPONDERANCE OF EVIDENCE. . . . . . . 25
III. THE APPEAL WAIVER CONTAINED IN THE PLEA
AGREEMENT DOES NOT PREVENT THIS COURT FROM
HEARING THE DEFENDANTS CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . 27
A. Enforcing the Terms of the Plea Agreement. . . . . . . . . . . . . . . . . . . 28
B. The Governments Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
C. Lack of Notice.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
-ii-
TABLE OF AUTHORITIES
CASES
Cleveland v. United States,
531 U.S. 12 (2000).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Martin Trust v. United States,
739 F.3d 1204 (9th Cir. 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
McNally v. United States,
483 U.S. 350 (1987). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Monterey Plaza Hotel Limited v. Local 483,
215 F.3d 923 (9th Cir. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Santobello v. New York,
404 U.S. 257 (1971). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
United States v. Ali,
620 F.3d 1062 (9th Cir. 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 18
United States v. Cope,
527 F.3d 944 (9th Cir. 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 33, 34
United States v. De la Fuente,
8 F.3d 1333 (9th Cir. 1993). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33, 34
United States v. Evans,
844 F.2d 36 (2d Cir.1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
United States v. Fowler,
794 F.2d 1446 (9th Cir. 1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
United States v. Garro,
517 F.3d 1163 (9th Cir. 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-iii-
Table of Authorities continued
United States v. Hicks,
217 F.3d 1038 (9th Cir. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
United States v. Kennedy,
554 F.3d 415 (3d Cir. 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
United States v. Lew,
875 F.2d 219 (9th Cir. 1989). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 18, 19
United States v. Milwitt,
475 F.3d 1150 (9th Cir. 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
United States v. Myers,
32 F.3d 411 (9th Cir. 1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
United States v. Navarro-Botello,
912 F.2d 318 (9th Cir.1990). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
United States v. Podde,
105 F.3d 813 (2d Cir. 1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
United States v. Riley,
335 F.3d 919 (9th Cir. 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
United States v. Salahmand,
651 F.3d 21 (D.C. Cir. 2011).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 22
United States v. Schuman,
127 F.3d 815 (9th Cir. 1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
United States v. Simpson,
538 F.3d 459 (6th Cir. 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
United States v. Staten,
466 F.3d 708 (9th Cir. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-iv-
Table of Authorities continued
United States v. Transfiguracion,
442 F.3d 1222 (9th Cir. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
United States v. Tsosie,
639 F.3d 1213 (9th Cir. 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28, 34
United States v. Valdez,
726 F.3d 684 (5th Cir. 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
United States v. Williams,
510 F.3d 416 (3d Cir. 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
United States v. Zolp,
479 F.3d 715 (9th Cir.2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
STATUTES
18 U.S.C. 3231. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
28 U.S.C. 1291. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 9, 11, 12
Fed. R. Crim. P. 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-v-
INTRODUCTION
This criminal prosecution arose out of a failed business venture and contract
dispute. Appellant David Foley sold some of the assets of his video game
business to another company called Global VR (GVR), but after the deal, he
continued to sell his own games. He maintained that he was entitled to do so
under the terms of the asset sale agreement, but GVR accused him of fraud. The
relationship became vitriolic. Federal prosecutors sided with GVR and brought
fraud charges against Mr. Foley.
Mr. Foley eventually entered into a plea agreement, in which he admitted to
a limited scope of criminal conduct in exchange for the governments promise to
dismiss most of the charges against him. He admitted that he misled customers by
selling mislabeled video games, and he admitted that he misled a bank in a
tangentially related mortgage application. But he never admitted that he defrauded
his former business partners in GVR. Indeed, throughout the legal proceedings, he
adamantly and steadfastly denied any such allegations.
At sentencing, however, the government argued that the true victim of the
crime was GVR, and that Mr. Foley should receive a substantial prison sentence
because GVR lost profits as a result of Mr. Foleys video game sales. The district
court agreed. The resulting sentence of imprisonment, however, was illegal. It
1
violated this Circuits law defining victims in a fraud case; it violated the
Sentencing Guidelines; and, above all, it violated the terms of the plea agreement.
STATEMENT OF JURISDICTION
The district court had jurisdiction under 18 U.S.C. 3231. This Court has
jurisdiction under 28 U.S.C. 1291. This appeal is from a final judgment of
conviction, entered by the district court on January 23, 2014. (ER 363.) The notice
of appeal was filed on February 3, 2014. (ER 355, Dkt. 259.)
BAIL STATUS
Mr. Foley is not in custody. He was sentenced by the district court to a term
of imprisonment of 24 months. However, on May 12, 2014, this Court granted
Mr. Foleys motion for release pending appeal. (ER 336.)
STATEMENT OF THE CASE
Mr. Foley was charged in two separate indictments. The first indictment,
returned in 2009, charged thirty-four counts of mail fraud and related offenses
including bank fraud and related offenses. (ER 436.) In 2011, the prosecution
amended the original indictment, and also filed a second indictment, charging
three counts of bank fraud and related offenses. (ER 414.) In 2012, Mr. Foley and
the government entered into a plea agreement intended to resolve both cases. Mr.
Foley pleaded guilty to one count of conspiracy to commit mail fraud and one
2
count of conspiracy to commit bank fraud. The government agreed to dismiss all
remaining counts.
After the plea agreement, the parties proceeded to sentencing. The district
court held a two-day evidentiary hearing to determine loss amount in December of
2012. After receiving additional arguments from the parties, the district court
entered its judgment and imposed its sentence on January 23, 2014. (ER 363.)
The court imposed a sentence of twenty-four months.
Mr. Foley filed a notice of appeal and a motion for release pending appeal.
After the district court denied the motion, Mr. Foley renewed the motion before
this Court. The government opposed Mr. Foleys motion for release and also filed
a motion to dismiss the appeal. On May 12, 2014, a motions panel of this Court
(Leavy, Callahan, and Hurwitz) denied the governments motion to dismiss the
appeal and granted Mr. Foleys motion for bail pending appeal.
STATEMENT OF FACTS
A. Background
Defendant-appellant David Foley owned and operated a video game
company called UltraCade. UltraCade sold video game software, primarily for use
in video arcades. In 2006, Foley entered into an asset sale agreement with Global
VR (GVR), another arcade video game company. Foley agreed to transfer the
3
assets of UltraCade to GVR, and he also entered into an employment agreement
with GVR.
The relationship between Mr. Foley and GVR quickly soured, and GVR
terminated Foleys employment only a few months after the purchase agreement.
The failed business relationship triggered accusations and counter-accusations of
bad faith. A civil lawsuit ensued, which eventually settled. GVR reported its
accusations to federal authorities, who eventually charged Mr. Foley with fraud.
B. The Mail Fraud Indictment
The government charged Mr. Foley under two separate indictments, one
focused on mail fraud and one focused on bank fraud. The first indictment was
filed in 2009. (ER 436.) It consisted of thirty-four charged counts of mail fraud,
conspiracy, and a variety of other offenses, including trafficking in counterfeit
goods and theft of trade secrets.
The core allegation of the first indictment was that Mr. Foley continued to
sell video game game packs for his own benefit even after GVR had acquired
the exclusive right to sell the game packs. It alleged that in 2006, Mr. Foley sold
all assets of UltraCade, including its licensing rights and intellectual property, to
GVR. It further alleged that under his employment and confidentiality agreement,
4
Mr. Foley was required to protect GVRs proprietary interests and act in GVRs
best interests.
According to the indictment, however, Mr. Foley failed to do so. The
indictment charged that he violated the purchase agreement and the employment
agreement by continuing to sell video game software on the side. It alleged that
Mr. Foley accomplished these sales secretly, and for his own benefit, using co-
defendant Michael Daddona as an intermediary. In sum, as the indictment
described it:
The gist of the conspiracy and scheme to and artifice to
defraud was that FOLEY, after reaping the benefits from
the sale of his company, ULTRACADE, which
ultimately resulted in the transfer of all of the assets and
intellectual property belonging to ULTRACADE and
FOLEY to GLOBAL VR, secretly manufactured and
sold game packs containing video arcade games with
counterfeit markings belonging to GLOBAL VR for his
own financial benefit.
(ER 440, Mail Fraud Indictment 16.)
The primary victim of the alleged offenses was GVR. The indictment
claimed that Mr. Foley had deceived GVR by selling games on the side, in
violation of his contractual agreements, and that the proceeds of the sales
rightfully belonged to GVR rather than Mr. Foley. It also alleged that, in order to
conceal the crime, Foley instructed Daddona to lie to GVR when GVR inquired
5
why Daddona had stopped purchasing GVR products. It thus alleged that Mr.
Foley defrauded GVR.
The indictment also alleged that Mr. Foley defrauded customers who
purchased the video games. It claimed that when Mr. Foley and Daddona sold
games, they falsely represented that the games were authentic and genuine GVR
products. (ER 443, Mail Fraud Indictment 23-24.) It thus alleged that Mr.
Foley defrauded customers by selling counterfeit products. In sum, the first
indictment alleged both that Mr. Foley defrauded his employer, GVR, and also
that he defrauded customers.
C. The Bank Fraud Indictment
The original indictment also contained allegations of bank fraud, which
were then moved to the second indictment in 2011. It consisted of three counts of
bank fraud and conspiracy to commit bank fraud. It alleged that, shortly after he
was terminated by GVR, Foley falsely represented in a home loan application to
Countrywide Mortgage that he was still employed by GVR. It further alleged that
Foley instructed a friend who still worked at GVR to confirm Foleys employment,
even though the friend knew Foley was in fact no longer employed. It charged
that these material and false statements constituted bank fraud.
//
6
D. Plea Agreement
Mr. Foley and the government entered into a plea agreement intended to
resolve both cases. (ER 405 Dkt #25.) As part of the deal, Mr. Foley pleaded
guilty to one count of conspiracy to commit mail fraud and one count of
conspiracy to commit bank fraud. In return, the government agreed to dismiss all
remaining counts from both indictments.
1. Factual Admissions
As the factual basis for the plea, Mr. Foley admitted some but not all of the
allegations that had been made in the indictments. Particularly with respect to the
mail fraud indictment, the scope of the admission was limited: Mr. Foley admitted
that he had deceived customers.
From approximately no later than June 2006 and
continuing to on or about February 2008, Michael
Daddona (Daddona) and I conspired and agreed to
devise a scheme to obtain money by making false or
fraudulent representations by mail and wire and to sell
thumb drives known as game packs, by mail and wire,
containing video gaming software that could be loaded
onto full arcade video game machines made for the home
market. Daddona and I knew that such false
representations, that the manufacturer of the goods to be
a company called UltraCade, were material to the
customers of game packs. I became a member of this
conspiracy knowing that the object was to obtain money
and I intended to help accomplish it.
7
Specifically, . . . I agreed and conspired to continue to
manufacture and sell game packs to Daddona at a time I
knew I was no longer associated with [UltraCade] or its
successor-in-interest. During all times between June
2006 and continuing to on or about February 2008, I
knowingly manufactured game packs from my residence
in Los Gatos, California. After I manufactured game
packs, I sold them to Daddona, and I agreed that he
would then sell game packs to the public using
packaging and advertisements that falsely represented
the goods to be UltraCade.
(Dkt. 25; ER 407, emphasis added.) Mr. Foley did not admit that he made false
statements to GVR or otherwise defrauded GVR.
With respect to the bank fraud allegations, Mr. Foley admitted that he
instructed another person to falsely verify his employment. Mr. Foley thus pleaded
guilty to two criminal counts, one in each case, and the government dropped all
remaining charges.
2. Sentencing Provisions
With respect to sentencing, the plea agreement was more open-ended. The
plea agreement described in standard language that the district court would
sentence in accordance with the Sentencing Guidelines and 3553(a) factors.
The plea agreement did not contain any specific deal regarding a Guidelines
calculation. Most importantly, it did not contain any agreement regarding the loss
calculation.
8
For the mail fraud count, the plea agreement stated that Mr. Foley could
argue for a loss of $0, but the government could argue for a loss of up to $1.5
million, resulting in a 16-point offense characteristic adjustment under the
Guidelines. (ER 410.) For the bank fraud count, the plea agreement stated that
Mr. Foley could argue for a loss of $0, but the government could argue for a loss
of up to $2.5 million, resulting in an 18-point offense characteristic adjustment.
(Id.)
3. Waivers
In addition to waiving his right to trial as part of the plea agreement, Mr.
Foley agreed to waive any right I may have to appeal any aspect of my sentence.
(ER 409.) He further agreed that he would not move to withdraw his guilty plea,
regardless of the sentence imposed by the court. (Id.) He also agreed not to
collaterally attack his conviction or sentence. (Id.)
The plea agreement also stated that if Mr. Foley violated any term of the
plea agreement, the government would be released from all of its obligations
under the deal, but Mr. Foley would still be bound. (Id. at 7-8) The agreement did
not contain any provision specifying what would happen if the government
breached the agreement.
//
9
E. Sentencing
Following the plea agreement, the parties proceeded to sentencing. With
respect to the bank fraud count, the district court determined that the loss amount
was zero because the value of the house as collateral was greater than the value of
the loan. Therefore, the lender had suffered no loss as a result of the false
statements made. Although the government initially maintained that the court
should calculate loss based on the entire value of the loan, it eventually conceded
that due to the value of the collateral, the lender suffered no loss. (ER 385; see
also ER 38-39.) The presentence investigation report thus recommended a loss
amount of zero for the bank fraud count. (ER 38-39.) Neither party objected, and
the district court agreed.
Because the loss amount was zero for the bank fraud count, the sentence
depended almost entirely on the loss amount for the mail fraud count.
1
The parties
disputed the loss amount for the mail fraud count. Both sides presented various
written submissions to the court, and the court held an evidentiary hearing to
determine loss.
1
Paragraph 109 of the PSR stated: since there is no loss associated with the
Bank Fraud count, the guideline range will be based solely on the loss for the
Mail/Wire Fraud.
10
1. The Parties Arguments
Prior to the hearing, the parties submitted a joint brief on loss outlining their
positions. The government argued for a loss amount of $1.5 million based on lost
profits to GVR. It argued that its proposed loss amount represents the amount of
money that Global VR could have made if Foley had not flooded the market with
his cheap counterfeit UltraCade game packs. (ER 391.) The defense, however,
argued and provided contracts showing that since GVR had only purchased non-
exclusive licenses from Foley and that UltraCade never owned the games, it was
improper to include any supposedly lost profits to GVR. (Id. at 6.) It contended
that the only misrepresentations made by Mr. Foley were those to customers, and
that the customers were not harmed by those misrepresentations, thus there was no
loss.
The district court held an evidentiary hearing on December 6, 2012. (ER
184.) As its primary witnesses, the government called former GVR executives.
They testified that they believed Mr. Foley had deceived them both in their
contract negotiations regarding the UltraCade sale and also while Mr. Foley was
employed by GVR. They testified that GVR suffered substantial financial loss
because Mr. Foley misled them about UltraCades financial prospects during
negotiations, and also that GVR lost profits as a result of Mr. Foleys continued
11
sales of video game packs. The government did not call any customers who
purchased products from Mr. Foley, nor did it at any point present evidence
regarding loss to customers.
After the evidentiary hearing, the parties presented additional submissions
and argument. The government continued to rely solely on loss to GVR, which it
claimed was severely harmed by Mr. Foleys conduct. (ER 389.) As the
prosecutor put it, I think we have a clear view of the defendants attempt to harm
Global VR. And they are the victim. (ER 161.) The defense continued to
maintain, however, that the only victims of the offense admitted in the plea deal
were the customers. [T]he only victim is the customers who bought the game
packs and that is what comes out of the facts allocute [sic] to in the plea deal.
(ER 132; see also 133-34, 154, 169 [Its a fraud case against the customer, right,
not against Global VR.].) Since there was no evidence of loss to customers, the
defense argued that the Guidelines loss amount should be zero.
2. The District Courts Ruling
After hearing the parties arguments, the district court indicated that it
agreed with the government that GVR could be considered a victim of the fraud.
(Id. at 47-50.) It then found lost profits to GVR of $450,000. (Id. at 51.)
12
The Guidelines range was calculated on that basis. The base offense level for the
offense was 7. The $450,000 loss figure resulted in a 14-point enhancement under
USSG 2B1.1, resulting in an adjusted offense level of 21. The Guidelines
recommended range was thus 37 to 46 months. (ER 118-19.) The district court
imposed a sentence of 24 months. (ER 119.)
SUMMARY OF ARGUMENT
Mr. Foley pleaded guilty to conspiring to defraud customers who purchased
his video games, and also to conspiring to defraud a bank who gave him a
mortgage. Neither victim suffered any loss as a result of the fraud. The district
court, however, imposed a sentence of imprisonment based on a finding that Mr.
Foleys former employer had lost profits.
That sentence was illegal. The plea agreement did not contain any
admissions that Mr. Foley defrauded his employer, and it did not contemplate that
he could be sentenced based on lost profits to his employer. Because Mr. Foleys
employer was not a victim of the offense that was admitted in the plea agreement,
it was impermissible to sentence him based on the employers lost profits. This
case should be remanded for resentencing.
//
//
13
ARGUMENT
I. THE DISTRICT COURT ERRED BY IMPOSING A SENTENCE
BASED ON LOSS TO A PARTY WHO WAS NOT A VICTIM OF
THE OFFENSE TO WHICH THE DEFENDANT PLEADED GUILTY
The government initially charged Mr. Foley with defrauding his employer,
GVR. But Mr. Foley did not plead guilty to that offense. Instead, he pleaded
guilty to defrauding customers. At sentencing, however, in computing the loss
amount, the district court relied entirely on perceived loss to GVR.
2
In effect, the
government obtained a plea based on the customer-fraud theory, but then obtained
a much more serious sentence based on the employer-fraud theory. The district
courts decision to sentence based on loss to GVR violated the terms of the plea
agreement. It also violated the Guidelines and this Circuits law on convergence
in mail fraud cases.
3
2
As noted above, the district court found and the government eventually
agreed that there was no loss with respect to the bank fraud count. The claims of
error raised by Mr. Foley in this appeal relate solely to the mail fraud count.
3
The standard of review of an interpretation of a contract is de novo.
Martin Trust v. United States, 739 F.3d 1204, 1210 (9th Cir. 2014). Whether the
government violated the terms of a plea agreement is also reviewed de novo.
United States v. Myers, 32 F.3d 411, 413 (9th Cir. 1994). A district courts
interpretation of the Guidelines is reviewed de novo, and its application of the
Guidelines to the facts of a particular case is reviewed for abuse of discretion.
United States v. Staten, 466 F.3d 708, 713 (9th Cir. 2006).
14
A. The Shifting Theories of Fraud
The government initially charged Mr. Foley with a fairly wide-ranging
fraud. The mail fraud indictment consisted of over thirty counts, covering a broad
range of conduct. It alleged that he defrauded both GVR and customers.
But Mr. Foley did not plead guilty to all of the counts, all of the conduct, or all the
theories of guilt in the indictment. Indeed, as is common in plea agreements, he
admitted to a narrower course of criminal conduct than that alleged in the
indictment. He pleaded guilty to a narrower theory of guilt, consisting of a single
count, in exchange for the government dropping all remaining charges.
The plain text of the plea agreement makes this clear. Mr. Foley admitted
that he falsely represented to customers that the goods he was selling them were
manufactured by UltraCade, and that those false representations . . . were material
to the customers of game packs. (ER 406.) He did not admit that he defrauded
GVR. He did not admit that he made any false statements to GVR.
He did not admit that he violated his contractual agreements with GVR. He did
not admit that he sold any goods that were the sole intellectual property of GVR.
Rather, he admitted that he had sold video games that were falsely labeled as being
UltraCade products, and that he had thereby deceived the customers who
purchased the games.
15
In sum, the sole factual admission was that he defrauded customers. There
was no admission that he defrauded his employer, GVR. Indeed, the fact that the
theory of fraud as to GVR was contained within the indictment but deleted from
the written plea agreement establishes that the parties agreed that GVR was not a
victim of the offense which Foley was admitting. And yet, at sentencing, the
government argued and the district court accepted that GVR was a victim of the
fraud, and therefore that Mr. Foleys sentence could be based on loss to GVR. In
effect, in order to obtain a greater sentence, the government shifted theories of the
offense after it obtained a plea agreement back to a theory it had dropped as part of
the plea agreement. The district courts ruling endorsing that tactic was error. The
resulting sentence violated the plea contract, and the sentence was therefore
illegal.
B. Convergence Doctrine
Even aside from the terms of the plea agreement, the district courts
sentence also violated this Circuits law governing mail fraud cases. Mail fraud is
a broad crime, but its reach is not limitless. It does not cover every act of
deception, or even every act of deception that results in financial gain. Both this
Court and the Supreme Court have placed several important limits on the reach of
the federal fraud statutes. One of those limitations is the convergence doctrine.
16
Under that doctrine, there must be some level of convergence between the fraud
and the loss. United States v. Ali, 620 F.3d 1062, 1070 (9th Cir. 2010). What
this means is that the person who is the object of the defendants deception must
also be the person who suffers a loss (actual or intended).
As this Court has stated, a defendant is not guilty of mail or wire fraud
unless he intends to obtain money or property from the one who is deceived.
United States v. Lew, 875 F.2d 219, 221 (9th Cir. 1989) (emphasis added). Where
money was not received from the party deceived, the defendants conduct is not
covered by the federal fraud statutes. Id. The Supreme Court has endorsed similar
principles. It has stated that for purposes of the mail fraud statute, the thing
obtained must be property in the hands of the victim. Cleveland v. United States,
531 U.S. 12, 15 (2000). Other circuits have reached similar conclusions, as a
simple matter of logic. If a scheme to defraud must involve the deceptive
obtaining of property, the conclusion seems logical that the deceived party must
lose some money or property. United States v. Evans, 844 F.2d 36, 39 (2d
Cir.1988).
Lew is particularly instructive. The defendant in Lew was an immigration
attorney who, according to the government, engaged in a scheme to defraud. He
falsified immigrant employment forms that he submitted to the Department of
17
Labor, on behalf of his paying clients. 875 F.2d at 220. The government argued
that because the defendant made money as a result of his lies, he was guilty of
fraud. But this Court reversed his conviction.
The Lew Court relied on the Supreme Courts holding in McNally v. United
States, 483 U.S. 350 (1987), that fundamentally, mail fraud requires proof that the
defendant intended to defraud and victimize some identifiable person.
Necessarily, then, lying to one person but obtaining money from someone else
does not constitute mail fraud. This Court therefore held that although the
defendant in Lew deceived the DOL, and obtained money from his clients, the
evidence was insufficient to prove fraud. The fact that it was all part of the same
course of conduct, or same overall scheme, was irrelevant. Because the defendant
did not deceive his clients, and there was no evidence that [the defendant]
obtained the money from his clients by defrauding them, he was not guilty of
mail fraud. 875 F.2d at 221.
Since Lew, this Court has clarified that it is not necessary that property be
taken directly from the victim, or that underlying misrepresentation must be made
directly to the victim. Ali, 620 F.3d at 1070. Nonetheless, it has repeatedly re-
affirmed the basic principle of convergence: the intent must be to obtain money
or property from the one who is deceived. Id. (quoting Lew, 875 F.2d at 221);
18
accord United States v. Milwitt, 475 F.3d 1150, 1156 (9th Cir. 2007); Monterey
Plaza Hotel Ltd. v. Local 483, 215 F.3d 923, 926 (9th Cir. 2000).
In this case, by basing its sentence on loss to GVR, the district courts
sentence violated the well-established principle of convergence in fraud cases.
Mr. Foley is not arguing that he is not guilty of conspiracy to commit mail fraud,
or that he did not plead guilty to a valid theory of mail fraud. He did plead guilty
to conspiracy to commit mail fraudby making false representations to
customers, in order to obtain money from them. But that was an offense for which
there was no loss, because the victims of that offense suffered no loss. Indeed, the
government conceded as much, making no effort at all to present evidence of
customers loss. Mr. Foley therefore should have received the base offense level,
without an adjustment for the victims loss.
Mr. Foley admitted to making misstatements to customers. That was the
sole factual basis for the offense of conviction. GVR was not the object (directly
or indirectly) of that deception, and therefore, under this Circuits law, GVR was
not a victim of the fraudulent conduct. The fact that GVR paid money to purchase
some of the assets of Mr. Foleys company, and that it could have suffered some
loss as part of Mr. Foleys entire course of conduct, is legally immaterial, just as it
was in Lew. Under the convergence doctrine, GVR cannot be considered a victim
19
of the offense of conviction.
C. Victims Under the Guidelines
The Sentencing Guidelines must be interpreted in light of this Courts
doctrine limiting the underlying crime of mail fraud. As described above, the
convergence doctrine limits the definition of the underlying offense, and must
therefore also limit the loss attributable to the offense. In addition, the district
courts loss calculation was erroneous under the Guidelines definitions of loss
and victim themselves. As two other circuits have recently explained, loss
under Chapter 2 of the Guidelines only includes loss that resulted from the offense
conduct itselfit does not include the broader category of loss resulting from any
related relevant conduct.
Under 2B1.1, loss is defined as actual or intended loss to victims. The
loss that may be counted is the loss that resulted from the offense. USSG
2B1.1, application note 3(A)(I) (emphasis added). The loss, in other words, must
be causally related to the offense of conviction. United States v. Hicks, 217 F.3d
1038, 1048 (9th Cir. 2000); see United States v. Simpson, 538 F.3d 459, 464 (6th
Cir. 2008) (The term loss in 2B1.1(b) does not encompass every harm
resulting from a crime, no matter how attenuated the causal link.). Moreover,
victim is defined as any person who sustained any part of the actual loss . . . as
20
a result of the offense. USSG 2B1.1, application note 1. Both definitions refer
to the offense.
In sentencing proceedings below, the government and the district court
relied heavily on the relevant conduct principles of the Guidelines. In essence,
the district court ruled that even if GVR was not a victim of the offense of
conviction, it was nonetheless a victim of Mr. Foleys entire course of relevant
conduct. That ruling misunderstood the meaning of the relevant conduct
provisions, and ignored the definition of victim that applies to 2B1.1.
The Guidelines define victim differently in different provisions. For 3A1.1,
the Guidelines define vulnerable victim as a person who is a victim of the
offense of conviction and any conduct for which the defendant is accountable
under 1B1.3 (Relevant Conduct). USSG 3A1.1, application note 2 (emphasis
added). By contrast, the definition of victim under 2B1.1 applies only to a
person who was harmed as a result of the offense. Thus, the Guidelines define
victim more broadly in 3A1.1, and more narrowly in 2B1.1.
Other circuits have recognized this critical distinction. The D.C. Circuit, for
example, recently explained the difference between the two definitions. See
United States v. Salahmand, 651 F.3d 21 (D.C. Cir. 2011). It noted that in 1997,
the Sentencing Commission amended the 3A1.1 definition of victim precisely to
21
broaden that definition to cover not just victims of the offense itself. Id. at 27.
Thus, the D.C. Circuit explained the apparent non sequitur that a person could
be a vulnerable victim without being a victim at all.
The problem that Salahmand has pointed out is not that his
minor patients were not victims, but that they were not victims
as defined by 2B1.1. They are, however, victims as defined
by 3A1.1, and there is nothing illogical about the Sentencing
Commission providing different definitions for different
guidelines.
Id.
The Third Circuit has likewise explained that the difference between the
two definitions of victim makes perfect sense in light of the difference between
the overall purpose of Chapters 2 and 3 of the Guidelines.
Chapter 2 of the Guidelines is entitled Offense Conduct and
controls the base offense level of the crime, whereas Chapter 3,
entitled Adjustments, contains a list of adjustments that
increase the number of Guidelines points for aggravating
factors such as the age of the victim or the use of a minor to
commit a crime. Because these two chapters serve different
purposes, the Sentencing Commission was free to define
victim differently in each.
United States v. Kennedy, 554 F.3d 415, 423 (3d Cir. 2009); see also United States
v. Valdez, 726 F.3d 684, 692-93 (5th Cir. 2013).
The Sentencing Commission is indeed free to define victim differently in
different provisions, and it has chosen to do so. In 3A1.1, it defined victim to
22
include anyone harmed either by the defendants offense conduct or by any other
relevant conduct. In 2B1.1, by contrast, it defined victim to include only those
harmed by the defendants offense conduct. In this case, the district court applied
the 3A1.1 definition to its loss calculation under 2B1.1. That ruling was
legally erroneous. Even if GVR was a victim of the broader course of relevant
conduct, it was not a victim of the offense of conviction. The district court
therefore erred by basing its loss calculation on GVRs lost profits.
D. Implicit Admission
The government has also argued that even if Mr. Foley did not explicitly
admit in the plea agreement that he defrauded GVR, he implicitly admitted to that
fraud. In other words, it has argued that although the customer-fraud theory was
the only theory specified, the employer-fraud theory was also implicit in the plea
agreement. That argument is faulty for two reasons, one legal and one factual.
First, as a legal matter, the government cannot claim the benefit of
implicit terms in plea agreements. This Court has recognized that in plea
negotiations, the government is the party with greater bargaining power and also
the party who drafts the agreement. As a result, this Court has steadfastly applied
the rule that any lack of clarity in a plea agreement should be construed against the
government as drafter. United States v. Cope, 527 F.3d 944, 951 (9th Cir. 2008).
23
The government could have sought to insert an admission to the employer-fraud
theory into the agreement, but it failed to do so. As a matter of law, it cannot
claim that such an admission was implicit in the deal.
Second, as a factual matter, Mr. Foley never admitted that he defrauded
GVR. To the contrary, both before and after the plea agreement, Mr. Foley
adamantly maintained that he had not committed any crime with respect to GVR.
(ER 23-24, 99-102.) As the PSR detailed, even after the plea agreement, Mr.
Foley maintained that he had only provided GVR a non-exclusive license to sell
video game packs, and that he therefore retained the legal right to sell the game
packs as a competitor product as well. (PSR at 49-61.)
4
Mr. Foley provided
evidence that clearly showed that GVR acknowledged this by paying him royalty
checks, even after terminating his employment, for their sales of his games. When
questioned by the trial judge at the final sentencing hearing, Mr. Foley persisted:
I never transferred those rights in full to Global VR. (ER 111.) While he did
admit some amount of wrongdoing namely, misleading customers and his
mortgage companythe record of proceedings below makes clear that he
consistently denied defrauding GVR.
4
Indeed, it was largely because Mr. Foley refused to admit fault in this
sense that the district court denied him an acceptance-of-responsibility reduction.
(ER 115-19.)
24
The government, of course, disagrees with Mr. Foley. It believes that Mr.
Foley did not have a legal right to continue selling game packs for his own benefit,
and therefore that he defrauded GVR. Whatever the factual merits of that dispute,
the fact remains that Mr. Foley never admitted anything of the sort. Indeed, it is
fair to say that Mr. Foley would not have accepted a plea agreement at all if he had
been required to admit that he defrauded GVR. The governments contention that
Mr. Foley implicitly conceded that point is not supported by the text of the plea
agreement itself, and it is utterly belied by the record as a whole.
II. THE DISTRICT COURT ERRED BY FINDING THE LOSS
AMOUNT BASED ON A PREPONDERANCE OF EVIDENCE
As described above, Mr. Foleys primary contention on appeal is that GVR
was not a victim of the offense of conviction, and therefore that losses to GVR
cannot be used to enhance his sentence. But even assuming arguendo that losses
to GVR can be counted, the district court erred by employing the preponderance
standard rather than the clear and convincing standard.
In general, findings under the Sentencing Guidelines must be supported by a
preponderance of the evidence.
5
However, when sentencing enhancements under
5
In its opposition to Mr. Foleys bail motion, the government argued that
Mr. Foley waived any objection to the standard because the parties initial joint
sentencing filing contained a statement that loss amounts must be supported by the
preponderance of evidence. (Ninth Cir. Dkt. 13-1 at 19-20; see also ER 388.)
25
the Guidelines have a disproportionate impact on a defendants sentence, a trial
court must find the enhancements by clear and convincing evidence. United
States v. Riley, 335 F.3d 919, 92526 (9th Cir. 2003). That rule applies to loss
calculations under 2B1.1. United States v. Zolp, 479 F.3d 715, 718 (9th
Cir.2007). Moreover, this Court has also held that it is particularly important to
apply the clear and convincing standard when enhancements are based on
relevant conduct that was not found by a jury or admitted in a plea agreement.
See United States v. Garro, 517 F.3d 1163, 1169 (9th Cir. 2008). The loss
calculation proposed by the government and accepted by the court in this case was
based on relevant conduct rather than the offense described in the plea
agreement itself.
The loss calculation also had a disproportionate impact on Mr. Foleys
sentence. As the probation officer stated in the PSR, the offense level is
determined largely on the basis of the total amount of loss. (PSR 109.) The
base offense leveli.e., the offense level that would have resulted based on the
guilty plea alonewas 7, which would have resulted in a recommended sentence
This boilerplate statement of the general standard, contained in a filing drafted by
the government, hardly constitutes waiver. Regardless, given this Courts long-
established and well-known case law governing the evidentiary standards under
the Guidelines, the district courts reliance on the wrong standard constituted plain
error.
26
of probation. The district courts loss calculation resulted in a 14-point
enhancement, which increased the recommended sentencing range from probation
to 37 to 46 months incarceration.
Because the loss was based on relevant conduct rather than the offense of
conviction, and also because the loss figure had a disproportionate impact on the
recommended sentence, the district court was required by this Circuits law to
employ the clear and convincing standard. Even if this Court determines that it
was appropriate to treat GVR as a victim for determining loss amount, it should
remand for re-sentencing with the proper standard.
III. THE APPEAL WAIVER CONTAINED IN THE PLEA AGREEMENT
DOES NOT PREVENT THIS COURT FROM HEARING THE
DEFENDANTS CLAIMS
The plea agreement entered into by the defendant and the government
contained a broad appeal waiver. It stated:
I agree to give up my right to appeal my convictions, the
judgment, and orders of the Court. I also agree to waive any
right I may have to appeal any aspect of my sentence, including
any orders relating to forfeiture and/or restitution.
(ER 409 [Plea Agreement at 5].)
After Mr. Foley filed his notice of appeal, the government filed a motion to
dismiss the appeal based on the appeal waiver. (ER 338.) This Court denied the
27
motion without prejudice to renewing the same arguments in the answering brief
on appeal. (ER 336.) Should the government choose to renew those arguments
again, this Court should not accept them. The sentence imposed in this case did
not comport with the terms of the plea agreement, and any ambiguity in that
respect must be resolved against the government. Under this Courts law
regarding the validity of appeal waivers, Mr. Foley is therefore entitled to appeal.
6
A. Enforcing the Terms of the Plea Agreement
The appeal waiver in the plea agreement states in unconditional terms that
Mr. Foley may not appeal any aspect of his sentence, no matter what sentence was
imposed. Such an appeal waiver, if read literally, would prevent a defendant from
appealing a death sentence imposed after a mail fraud conviction. Happily, this
Courts case law does not countenance such a result. While appeal waivers are
generally valid, they are not binding if:
(1) a defendant's guilty plea failed to comply with Fed. R.
Crim. P. 11; (2) the sentencing judge informs a defendant that
she retains the right to appeal; (3) the sentence does not
comport with the terms of the plea agreement; or (4) the
sentence violates the law.
United States v. Tsosie, 639 F.3d 1213, 1217 (9th Cir. 2011) (internal quotation
6
Whether a defendant waived his right to appeal is reviewed de novo.
United States v. Schuman, 127 F.3d 815, 817 (9th Cir. 1997).
28
marks omitted).
In this case, the third exception applies because the sentence imposed did
not comport with the terms of the plea agreement. See United States v.
Navarro-Botello, 912 F.2d 318, 321 (9th Cir.1990) (We note, however, that a
waiver of the right to appeal would not prevent an appeal where the sentence
imposed is not in accordance with the negotiated agreement.). As described in
Argument I above, Mr. Foley pleaded guilty to a crime of defrauding his
customers. The plea agreement, by its terms, contemplated that he would be
sentenced on the basis of that admitted conduct. The plea agreement contemplated,
in other words, that he would be sentenced based on the admission that he
defrauded customers, not that he defrauded GVR. The district courts sentence did
not comport with that agreement, and therefore, the appeal waiver does not apply.
In short, if this Court accepts the merits of Mr. Foleys argument regarding his
sentence, then the appeal waiver is necessarily inoperative as well.
The fourth exception also applies. This Court has held that the fourth
exception applies in several circumstances, including when a sentence violates the
Constitution and when it exceeds the statutory maximum. The fourth exception
also applies when a sentence is not authorized by the judgment of conviction.
United States v. Fowler, 794 F.2d 1446, 1449 (9th Cir. 1986). In this case, the
29
sentence was not authorized by the judgment of conviction because the sentence
was imposed based on a different offense than that to which the defendant pleaded
guilty.
Put differently, appeal waivers should not be enforced in circumstances like
this where the government goes outside the terms of the plea agreement to obtain a
stiffer sentence. In this case, the government violated the plea agreement by
seeking and obtaining a sentence for conduct not covered by the agreement. The
government initially charged Mr. Foley with dozens of counts covering a wide
variety of criminal conduct, including defrauding GVR. But the parties then
agreed to a deal whereby Mr. Foley would admit to a much narrower admitted
course of criminal conduct, conspiring to defraud customers and his bank, in
exchange for dropping all remaining counts. The government then illegally
sought a sentence based on conduct not covered by the agreementindeed, based
on allegations that were dropped as part of the agreement.
The government is required to honor its commitments in plea bargaining.
This is true both as a matter of contract law and also as a matter of due process.
Santobello v. New York, 404 U.S. 257, 262 (1971); United States v.
Transfiguracion, 442 F.3d 1222, 1228 (9th Cir. 2006). In this case, the
government sought and received a sentence that did not comport with the bargain
30
contained in the plea agreement. Because the sentence did not comport with the
agreement, Mr. Foley is entitled to appeal the sentence notwithstanding the appeal
waiver provision.
B. The Governments Responsibility
The government will no doubt argue that it upheld its end of the bargain,
and that Mr. Foley has violated the deal by appealing the sentence. For the
reasons given above, Mr. Foley submits that the plain terms of the plea agreement
contemplated that he be sentenced for conspiring to defraud customers, not for
defrauding GVR. Looking outside the four corners of the plea agreement and
examining the record of proceedings below, however, suggests that from the
outset, the parties in this case had vastly different views of the meaning of the plea
agreement.
After the parties signed the plea agreement, Mr. Foley made a variety of
statementsto the probation officer, to the district judge, and elsewherethat he
had not defrauded GVR, and that in fact GVR had violated its contractual
commitments to him. For his part, while Mr. Foley apologized for his criminal
conduct, he offered no apology to GVRand indeed he continued to maintain that
he had been wronged by GVR. (See, e.g., 1-21-14 Tr. at 98-99.)
The government responded fairly angrily to these statements. It argued that
31
Mr. Foley had contradicted the statements made in the plea agreement, and that he
had failed to accept responsibility for the admitted offense. (ER at 10-12.) As the
prosecutor stated at the sentencing hearing:
He denies that Global VR was a victim of the offense and even
blames his criminal conduct on Global VR stating were it not
for the continued deliberate actions of Global VR to
systematically dismantle UltraCade . . . I would not have found
myself in the circumstances that led me to break the law.
(ER 11.)
The government thus argued that Mr. Foley was not entitled to any
sentencing reduction for acceptance of responsibility, because he continued to
deny his culpable conduct in defrauding GVR. By contrast, Mr. Foley believed
that the entire point of the plea agreement was that he was never required to admit
that he defrauded GVR.
7
He admitted to some criminal conduct, but he
maintainedabsolutely, persistently, and (to the government) annoyinglythat he
had not committed any criminal offense with respect to GVR.
In sum, the parties disagreed about exactly what crime and what sentence
the plea agreement contemplated. From the outset, the language of the plea
7
The Commentary to USSG 3E1.1, the guideline providing a downward
adjustment for Acceptance of Responsibility, notes that a defendant is not
required to volunteer, or affirmatively admit, relevant conduct beyond the offense
of conviction in order to obtain a reduction under subsection (a).
32
contract was not sufficiently clear to settle the parties expectations in these
matters.
Plea agreements are strictly construed against the government, which is the
drafting party and the party with disproportionate bargaining power. United States
v. Williams, 510 F.3d 416, 422 (3d Cir. 2007); United States v. Podde, 105 F.3d
813, 820 (2d Cir. 1997). Consequently, any lack of clarity in the agreement is
construed against the government. United States v. Cope, 527 F.3d 944, 951 (9th
Cir. 2008). Ambiguities in plea agreements must be construed in the defendants
favor. Id. In short, it is government who must bear responsibility for any
ambiguities or gaps in a plea agreement. United States v. De la Fuente, 8 F.3d
1333, 1337 (9th Cir. 1993) (internal quotation marks omitted).
If the government believed that the essential crime in this case was
defrauding GVR, it could have sought to include explicit admissions to that effect
in the plea agreement. It failed to do so. If the government believed that GVR
was a victim of the offense in this case, and that the sentence should be determined
based on lost profits to GVR, it could have included provisions to that effect in the
plea agreement. It failed to do so. The government maintains that these terms
were implicit in the plea agreement, but even if the governments interpretation of
the agreement were equally plausiblewhich it is notthe ambiguity must be
33
resolved in Mr. Foleys favor. De la Fuente, 8 F.3d at 1338.
These principles apply to the substantive bargain itself and also to the
appeal waiver. Like any other provision of a plea agreement, an appeal waiver
must be strictly construed against the government. Cope, 527 F.3d at 951. In
Cope, the trial court imposed a sentence including terms not contemplated by the
plea agreement, and the defendant sought to appeal that sentence notwithstanding
an appeal waiver. This Court held that because there was an ambiguity in the
agreement, the defendant could appeal. Id. at 950-51. The same is true here.
Because the government bears responsibility for any lack of clarity about the
permissible sentence and the basis of the loss calculation, the government should
not be able to preclude review of this case by virtue of the appeal waiver.
C. Lack of Notice
Similarly, this Court has also held that lack of notice regarding a plea
agreements terms renders an appeal waiver invalid. A defendants decision to
enter into a plea bargain, including his waiver of constitutional and statutory
rights, must be knowingly, intelligently, and voluntarily made. This fundamental
principle applies to appeal waivers. See Tsosie, 639 F.3d at 1217 (We have also
stated that we will not give effect to an appeal waiver if it is not made knowingly
and voluntarily.). A defendant cannot validly waive his right to appeal a sentence
34
if he does not have sufficient notice of the sentence that may be imposed.
This Court has re-affirmed that principle repeatedly. In United States v.
Phillips, this Court declined to enforce an appeal waiver because the plea
agreement was ambiguous regarding the amount of restitution that might be
imposed. 174 F.3d 1074, 1076 (9th Cir. 1999). In United States v. Gordon, this
Court again declined to enforce a waiver because the plea agreement was
unclear regarding the damages calculation and therefore the defendant lacked
sufficient notice regarding the sentence that might be imposed. 393 F.3d 1044,
1050 (9th Cir. 2004).
In this case, the plea agreement failed to provide fair warning or any
indication to Mr. Foley that he could be sentenced based on lost profits to GVR.
Indeed, the record makes clear that Mr. Foley believed his acceptance of the
agreement did not involve any admission of wrongdoing regarding GVR. He
reasonably believed that he could not be sentenced based on loss to GVR, in large
part because the plea agreement itself failed to specify anything to the contrary.
Because he lacked notice that he could be sentenced on that basis, the appeal
waiver was not knowing and voluntary. It therefore should not be enforced.
//
//
35
CONCLUSION
Mr. Foley sought to resolve this case without admitting that he defrauded
GVR. He was willing to admit some criminal conduct, but he was not willing to
admit wronging GVRbecause he sincerely believes that he did no such thing. If
Mr. Foley had known that his plea agreement, in addition to the very detailed
explicit admissions, involved some implicit admission that he defrauded GVR,
and thus that he could receive a substantial prison sentence based on lost profits to
GVR, he would not have accepted the deal. Indeed, Mr. Foley accepted the
bargain precisely because he believed that in exchange for his specific and explicit
admissions, the government was dropping allegations of wrongdoing against
GVR.
The plea agreement should be enforced as it was written, and Mr. Foley
should be sentenced solely based on loss to victims of the conduct constituting the
admitted offense.
Dated: August 18, 2014 Respectfully submitted,
RIORDAN & HORGAN
/s/ Dennis P. Riordan
DENNIS P. RIORDAN
Attorney for Appellant
DAVID FOLEY
36
STATEMENT OF RELATED CASES
Appellant, pursuant to L.R. 28-2.6, states that he knows of no related cases
pending in this Court.
CERTIFICATION REGARDING BRIEF FORM
I, Donald M. Horgan, hereby certify that the foregoing brief is
proportionately spaced, has a typeface of 14 points, and contains 8,084 words.
Dated: August 18, 2014
/s/ Donald M. Horgan
DONALD M. HORGAN
CERTIFICATE OF SERVICE
When All Case Participants are Registered for the
Appellate CM/ECF System
I hereby certify that on August 18, 2014 I electronically filed the foregoing with
the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit
by using the appellate CM/ECF system.
I certify that all participants in the case are registered CM/ECF users and that
service will be accomplished by the appellate CM/ECF system.
Signature: /s/ Jocilene Yue
Jocilene Yue
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CERTIFICATE OF SERVICE
When Not All Case Participants are Registered for the
Appellate CM/ECF System
I hereby certify that on , I electronically filed the foregoing with the
Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by
using the appellate CM/ECF system.
Participants in the case who are registered CM/ECF users will be served by the
appellate CM/ECF system.
I further certify that some of the participants in the case are not registered
CM/ECF users. I have mailed the foregoing document by First-Class Mail,
postage prepaid, or have dispatched it to a third party commercial carrier for
delivery within 3 calendar days to the following non-CM/ECF participants:
Signature:
Jocilene Yue

USA v. David Foley - Court of Appeals Docket 14-10055 Doc 22-1

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USA v. David Foley - Court of Appeals Docket 14-10055 Doc 22-1

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