In United States v. Kirilyuk, --- F.4th ---, No. 19-10447 (9th Cir. 2022), the Court vacated the sentence in a complex fraud conspiracy involving over 120,000 stolen American Express cards.
There is a lot to this important case, so my summary is longer than usual.
First, "Kirilyuk contends that Application Note 3(F)(i)’s mandatory $500-per-card minimum conflicts with the plain meaning of 'loss' under § 2B1.1, and he asks us to find it non-binding under Stinson v. United States, 508 U.S. 36, 38 (1993). We agree and do not consider the Application Note authoritative."
At the outset, the Court "look[ed] to see whether our prior precedent forecloses Kirilyuk’s challenge to Application Note 3(F)(i)."
"To be sure, in two published cases, we interpreted and applied Application Note 3(F)(i) or its predecessor. See United States v. Yellowe, 24 F.3d 1110 (9th Cir. 1994); United States v. Gainza, 982 F.3d 762 (9th Cir. 2020). But neither case analyzed the Note’s validity under Stinson, so neither case binds us on this question. Prior precedent that does not “squarely address” a particular issue does not bind later panels on the question. Brecht v. Abrahamson, 507 U.S. 619, 631 (1993). As we have repeatedly stated, '[q]uestions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents.' United States v. Ped, 943 F.3d 427, 434 (9th Cir. 2019) (simplified). Thus, cases are 'not precedential for propositions not considered,' United States v. Pepe, 895 F.3d 679, 688 (9th Cir. 2018), or for matters that are 'simply assumed,' Sonner v. Premier Nutrition Corp., 971 F.3d 834, 842 n.5 (9th Cir. 2020). Indeed, if a prior case does not 'raise or consider the implications' of a legal argument, it does 'not constrain our analysis.' United States v. Cassel, 408 F.3d 622, 633 n.9 (9th Cir. 2005)."
"Even if precedent doesn’t foreclose reaching the merits, the government still contends that Kirilyuk forfeited his Stinson challenge by not raising it in the district court. This is inaccurate. '[I]t is claims that are deemed waived or forfeited, not arguments.' United States v. Lloyd, 807 F.3d 1128, 1174–75 (9th Cir. 2015) (simplified). Before the district court, Kirilyuk specifically objected to the applicability of Application Note 3(F)(1) as 'arbitrary,' 'artificially high,' and 'contrary to relevant case law and concepts of justice.' 'Once a federal claim is properly presented, a party can make any argument in support of that claim; parties are not limited to the precise arguments they made below.' Id. at 1175 (simplified). Thus, Kirilyuk’s sentencing objection was enough to preserve our de novo review of his Stinson challenge."
"Finally, the government argues we should not reach the Stinson issue because Kirilyuk didn’t raise it until his reply brief. It is true that an appellant generally waives any argument not raised in the opening brief. See Friends of Yosemite Valley v. Kempthorne, 520 F.3d 1024, 1033 (9th Cir. 2008). But we’ve recognized two exceptions to that rule: (1) when failure to consider the argument would lead to “manifest injustice,” and (2) when the 'opposing party will not suffer prejudice.' Hall v. City of Los Angeles, 697 F.3d 1059, 1071 (9th Cir. 2012). Both exceptions apply here. First, Application Note 3(F)(1) boosted Kirilyuk’s base offense level—from +16 to +22, see U.S.S.G. § 2B1.1(b)(1)(I), (L), significantly increasing his sentencing range and raising a concern for a manifest injustice. Second, both parties had ample opportunity to address this question in supplemental briefing and so we see no prejudice to the government. We thus exercise our discretion to consider Kirilyuk’s Stinson argument and turn to the merits."
On the merits, "the Supreme Court has told us that there is a limit to the binding nature of the Application Notes. Stinson says that an Application Note “that interprets or explains a guideline is authoritative unless it . . . is inconsistent with, or a plainly erroneous reading of, that guideline."
"The question here is simple: Is Note 3(F)(i)’s 'special rule' for calculating loss by using a minimum $500-per-card multiplier consistent with the plain meaning of 'loss'? We hold that it is not.
"Though dictionary definitions for 'loss' may vary, they make one thing clear: 'No reasonable person would define the ‘loss’ from a stolen [credit] card as an automatic $500' rather than a fact-specific amount. Id. Instead, § 2B1.1 is driven by 'the amount of loss caused by the crime.' Gainza, 982 F.3d at 764 (emphasis added). So 'loss' cannot mean a pre-determined, contrived amount with no connection to the crime committed, even if it is based on the Commission’s 'research and data.' See U.S.S.G. amend. 596 (Nov. 2000). Application Note (3)(F)(i) thus doesn’t illuminate the meaning of 'loss,' but modifies it. Yet 'Stinson requires that commentary interpret the guidelines, not contradict or add to them.'"
"This case illustrates the egregious problem with the Application Note’s expansion of the meaning of “loss.” As determined by the Probation Office, Kirilyuk’s conspiracy involved $1.4 million in actual losses or $3.4 million in intended losses. Applying the $500-per-card multiplier balloons the “loss” to $60 million—17 times greater than the intended loss. While the conspiracy was designed to charge only $15 to $30 per credit card, the Application Note asks us to deem each loss to be $500. Application Note 3(F)(i) thus operates as an enhanced punishment, rather than an assessment of “loss” tied to the facts of the case. But Stinson makes clear that the role of the Application Notes is to explain the Guidelines, not enact policy changes to them. We thus hold that Application Note 3(F)(i)’s expansion of the meaning of “loss” is 'clearly inconsistent with the language of the Guideline' and is not binding under Stinson."
"Because Application Note 3(F)(i) contorts the meaning of “loss” to equal “$500” in credit card cases, we hold that it is not binding and that Kirilyuk’s 22-level enhancement cannot stand."
"We next turn to the enhancement for use of an “authentication feature” under § 2B1.1(b)(11)(A)(ii). We hold that the district court erred in imposing that enhancement because the purported authentication features used here were issued by American Express or a bank, not an “issuing authority” as defined by the Guidelines."
Finally, "[a]lthough not raised by Kirilyuk, the government commendably concedes that the district court imposed an illegal sentence by imposing a 264-month sentence on each of Kirilyuk’s wire and mail fraud counts. Both wire and mail fraud carry a maximum penalty of 240 months’ imprisonment for each count. See 18 U.S.C. § 1343 (wire fraud); 18 U.S.C. § 1341 (mail fraud). So the government is right that the district court’s sentence of 264 months per count was illegal.
"[T]the district court would have been free to hand down a shorter sentence had it realized the error in the imposed sentence. Thus, it would be 'a miscarriage of justice to give [Kirilyuk] an illegal sentence' in this case."
“A defendant is entitled to an instruction on a lesser-included offense if the law and evidence satisfy a two-part test: 1) ‘the elements of the lesser offense are a subset of the elements of the charged offense’; and 2) ‘the evidence would permit a jury rationally to find [the defendant] guilty of the lesser offense and acquit [him] of the greater.’”
"There is no dispute in this case about the first step of the two-part test for lesser-included instructions. As the government concedes, it is well-established that misdemeanor attempted illegal entry is a lesser-included offense of felony attempted illegal entry. Indeed, the elements of the two offenses are the same except that felony attempted illegal entry includes the added element of a prior § 1325(a) conviction; that is, a first offense is a misdemeanor, and a subsequent offense is a felony."
"As for the second step of the two-part test, we conclude that the district court abused its discretion in finding that the jury could not rationally find Medina-Suarez guilty of the lesser offense (misdemeanor attempted illegal entry) and acquit him of the greater offense (felony attempted illegal entry). Given that the only distinct element required for a felony conviction in this case is a prior conviction for the same crime, the jury could have rationally chosen the lesser offense simply by finding that the government failed to prove that Medina-Suarez was previously convicted under 8 U.S.C. § 1325(a)."
"The fact that the jury did ultimately return a felony conviction below does not undermine this point. As the Supreme Court has acknowledged, one of the very purposes of a lesser-included offense instruction is to protect a defendant from the possibility that 'where the jury suspects that the defendant is plainly guilty of some offense, but one of the elements of the charged offense remains in doubt, . . . the jury will likely fail to give full effect to the reasonable-doubt standard, resolving its doubts in favor of conviction.'"
In a footnote, the Court also provides this helpful suggestion: "In cases like this one where the element that distinguishes the lesser offense from the greater is a prior conviction—the proof of which is completely divorced from the proof of the other elements—it could be argued that a lesser-included offense instruction should be given on request any time the defendant does not concede the distinguishing element, even when that element is not actively contested."
