                                                                      FILED
                                                          United States Court of Appeals
                                                                  Tenth Circuit

                                     PUBLISH                  December 23, 2019
                                                             Elisabeth A. Shumaker
                  UNITED STATES COURT OF APPEALS                 Clerk of Court

                               TENTH CIRCUIT



 UNITED STATES OF AMERICA,

             Plaintiff - Appellee,
 v.                                                    No. 19-7006
 STONEY RAY MENDENHALL,

             Defendant - Appellant.


        APPEAL FROM THE UNITED STATES DISTRICT COURT
           FOR THE EASTERN DISTRICT OF OKLAHOMA
                  (D.C. NO. 6:18-CR-00045-RAW)


Barry L. Derryberry, Assistant Federal Public Defender (Julia L. O’Connell,
Federal Public Defender, and Whitney R. Mauldin, Assistant Federal Public
Defender, with him on the brief), Office of the Federal Public Defender, Northern
and Eastern Districts of Oklahoma, Tulsa Oklahoma, for Appellant.

Gregory Dean Burris, Assistant United States Attorney (Brian J. Kuester, United
States Attorney, and Linda A. Epperley, Assistant United States Attorney, with
him on the brief), Office of the United States Attorney, Muskogee, Oklahoma, for
Appellee.


Before TYMKOVICH, Chief Judge, BALDOCK, and EID, Circuit Judges.


TYMKOVICH, Chief Judge.
      This case requires us to consider the appropriate scope of an order of

restitution. Relying on controlling Supreme Court precedent, we conclude that

Congress has authorized restitution only “for the loss caused by the specific

conduct that is the basis of the offense of conviction.” Hughey v. United States,

495 U.S. 411, 413 (1990). In ordering restitution for losses related to, but not

arising directly from, defendant’s offense of conviction, the district court

exceeded the range of restitution authorized by the Mandatory Victims Restitution

Act. Accordingly, we reverse.

                                 I. Background

      In 2018, a burglar broke into H&H Pawn Gun & Tool (H&H) and stole a

substantial amount of property. An inventory revealed that 62 firearms were

among the property stolen. Of the 62 firearms, only 13 to 15 were eventually

recovered. 1

      A subsequent investigation by the sheriff’s office and the Bureau of

Alcohol, Tobacco, Firearms and Explosives led to Stoney Ray Mendenhall.

Numerous pieces of evidence suggest Mendenhall committed the burglary. For

example, an informant told investigators that Mendenhall had discussed details of


      1
        The government stated in its brief before this court that only 13 were
recovered, citing to the Presentence Investigation Report. See Aple. Br. at 3. The
PSR, however, lists 14 firearms as having been recovered. Adding to the
uncertainty, the government stated in its briefing below that “fifteen of the stolen
firearms” had been recovered as of February 12, 2019. R. Vol. I at 16.

                                         -2-
how he accomplished the burglary. Indeed, even Mendenhall’s mother told

investigators she had seen him in possession of two firearms matching the

descriptions of stolen firearms and that she believed Mendenhall was somehow

involved in the burglary. For his part, Mendenhall does not meaningfully dispute

this evidence. See Aplt. Br. at 10 (conceding that “the record supports a finding

that [Mendenhall] caused property damage and other collateral damage” to H&H).

      Notwithstanding this evidence and for reasons not stated in the record,

Mendenhall was not charged with burglary. Instead, in a single-count indictment,

a grand jury only charged Mendenhall with “knowingly possess[ing], receiv[ing]

and conceal[ing] a stolen firearm” in violation of 18 U.S.C. §§ 922(j), 924(a)(2).

R. Vol. I at 7. The indictment states this violation occurred with respect to three

firearms, each of which is identified by serial number therein. All three of the

firearms listed were recovered and returned to H&H.

      Mendenhall pleaded guilty to knowingly possessing and concealing the

firearms listed on the indictment. In the plea colloquy, he did not go further and

accept guilt for the burglary or other related acts.

       The PSR calculated the advisory sentencing range by incorporating certain

upward adjustments of Mendenhall’s base offense level due to the fact that “the

offense[] involv[ed] 25-99 firearms” and the fact that Mendenhall “us[ed] or

possess[ed] any firearm . . . in connection with another felony offense.” R. Vol.


                                          -3-
III at 9. The PSR also recommended mandatory restitution to H&H pursuant to

18 U.S.C. § 3663A in the amount of $33,763.23 for “the loss of firearms not

recovered, wages for employees to conduct inventory, loss of revenue for closing

of business (historical average of Saturdays and Mondays), and cleanup/repairs.”

Id. at 14. Mendenhall did not object to any provision of the PSR at sentencing.

The district court sentenced Mendenhall to 34 months’ imprisonment followed by

three years of supervised release and ordered Mendenhall to pay restitution to

H&H in the amount recommended by the PSR.

                                    II. Analysis

      Mendenhall challenges the district court’s restitution order as outside the

bounds of what is authorized by 18 U.S.C. § 3663A. Generally, “[w]e review the

legality of a restitution order de novo, the district court’s factual findings for

clear error, and the amount of restitution for abuse of discretion.” United States

v. Parker, 553 F.3d 1309, 1323 (10th Cir. 2009). Where the defendant has not

properly preserved the issue below, however, we review a restitution order for

plain error. See United States v. James, 564 F.3d 1237 (10th Cir. 2009).

      Mendenhall concedes plain error is the appropriate standard of review

because no objections were made to the restitution order or the PSR below. To

prevail under this standard, he must show “(1) an error; (2) that is plain; (3) that

affects substantial rights; and (4) that seriously affects the fairness, integrity, or


                                           -4-
public reputation of judicial proceedings.” United States v. Mann, 786 F.3d 1244,

1248 (10th Cir. 2015).

       A. Was there Plain Error?

       Mendenhall contends that the district court plainly erred because the loss

underlying the restitution order was not caused by the offense of conviction.

Relying on the Supreme Court’s decision in Hughey, we agree. See 495 U.S. at

413.

       District courts lack inherent powers to order restitution. See United States

v. West, 646 F.3d 745, 750 (10th Cir. 2011). Instead, such authority stems from

Congress. In 18 U.S.C. § 3663A, Congress authorized courts to grant restitution

in certain circumstances. Section 3663A requires district courts to order

defendants convicted of certain crimes to “make restitution to the victim of the

offense.” 18 U.S.C. § 3663A(a)(1). “Victim” is defined, as relevant here, as “a

person directly and proximately harmed as a result of the commission of an

offense for which restitution may be ordered.” 18 U.S.C. § 3663A(a)(2). The

parties do not dispute that possessing, concealing, and receiving a stolen firearm

under 18 U.S.C. §§ 922(j) and 924(a)(2)—Mendenhall’s offense of conviction—is

generally a qualifying offense under the statute. Where the parties diverge is

whether the loss incurred by H&H was a direct and proximate result of the

offense for which Mendenhall was indicted and convicted.


                                         -5-
       In Hughey, the Supreme Court interpreted a similarly structured restitution

statute. See 495 U.S. 411, 415–16 (1990) (interpreting what is now 18 U.S.C.

§ 3663). The Court held statutory language authorizing restitution to the victim

of “an offense” permitted district courts to order restitution “only for losses

caused by the conduct underlying the offense of conviction.” See id. at 416.

Hughey abrogated our prior holding in United States v. Duncan permitting

restitution for losses associated with additional counts of an indictment for which

a defendant had not been convicted because they “had a significant connection to

the act for which conviction was had.” 870 F.2d 1532, 1537 (10th Cir. 1989). As

this court has found, Hughey’s limitation applies equally to restitution orders

under 18 U.S.C. § 3663A, such as the one at issue here. See West, 646 F.3d at

751.

       This limitation dictates the result here. Mendenhall pleaded guilty and was

convicted for possessing, receiving, and concealing stolen firearms under 18

U.S.C. §§ 922(j) and 924(a)(2). Such a conviction requires (1) knowing

possession of a stolen firearm, (2) that moved or had been shipped in interstate

commerce, and (3) knowing or having reasonable cause to believe it was stolen.

18 U.S.C. §§ 922(j); see also United States v. Al-Rekabi, 454 F.3d 1113, 1124

(10th Cir. 2006). None of these elements caused the losses cited as the basis for

the restitution order: “the loss of firearms not recovered, wages for employees to


                                          -6-
conduct inventory, loss of revenue for closing of business (historical average of

Saturdays and Mondays), and cleanup/repairs.” R. Vol. III at 14. The three

firearms listed in the indictment were recovered and returned. Accordingly,

possessing them did not cause “the loss of firearms not recovered.” The

remaining losses arise from the burglary of H&H, not from Mendenhall’s

possession, receipt, or concealment of the stolen firearms.

      The Fourth Circuit’s decision in United States v. Davis is instructive. See

714 F.3d 809, 811 (4th Cir. 2013). In Davis, the defendant broke into a home and

stole a handgun, ammunition, and several pieces of jewelry. Similar to

Mendenhall here, the defendant pleaded guilty to only a single count of

possessing a stolen firearm. Despite instructions in the PSR noting that

restitution was inappropriate under the circumstances in light of Hughey, the

district court in Davis awarded the homeowner $685 in restitution in part to cover

damages resulting from the burglary. See id. at 812. The Fourth Circuit reversed.

Citing Hughey, the court explained that although the defendant’s “burglary and

theft of the firearm represent necessary steps in the accomplishment” of the

convicted offense, they were “legally irrelevant for the purpose of restitution.”

Id. at 814. Because the losses to the homeowner were not caused by the offense

of conviction, namely the possession of a firearm with knowledge that it was

stolen, those losses could not be the subject of restitution. See id. The same


                                         -7-
result is warranted here. Mendenhall’s knowing possession of stolen firearms that

were subsequently returned cannot reasonably be said to have caused the damage

to H&H or its lost revenue.

      The government opposes this conclusion by relying on our decision in

United States v. Burns, 800 F.3d 1256 (10th Cir. 2015). In Burns, we upheld an

order of restitution for the value of 47 items of stolen mail where the defendant

pleaded guilty to possessing stolen mail. See id. at 1259. Our decision upheld the

full value of the restitution order despite the fact that the defendant disputed

whether he in fact possessed 5 of the 47 items. The government suggests Burns

warrants upholding the portion of the restitution order that relates to the

remaining unrecovered firearms because the evidence here “is sufficient to

support the district court’s finding that Mendenhall more likely than not took the

59 disputed firearms.” Aple. Br. at 17.

      This overlooks crucial dissimilarities between Burns and the present case.

First, in Burns the defendant did not argue, and the court did not address, whether

the restitution order was valid under Hughey. See 800 F.3d at 1259–60. Second,

unlike Burns, where the information 2 was drafted broadly enough to capture the


      2
         The defendant in Burns consented to proceeding under an information as
opposed to an indictment. The information stated broadly that the defendant “did
knowingly receive and unlawfully have in his possession letters, packages, mail,
and articles and things contained therein, which had been taken and stolen from
                                                                     (continued...)

                                          -8-
five disputed pieces of mail, here the indictment narrowly identifies only three

firearms by serial number. See R. Vol. I at 7. Accordingly, the charged conduct

in Burns was broad enough to encompass the restitution ordered, whereas here it

is not.

          The government’s reliance on the facts admitted in the PSR is similarly

unavailing. 3 Although the district court accepted the PSR, including its facts

regarding the burglary of H&H, without objection at sentencing, those facts fail to

support the district court’s order of restitution. See United States v. Ward, 182 F.

App’x 779, 802 (10th Cir. 2006) (recognizing that while the district court may

rely on uncharged conduct in calculating a defendant’s sentence, such uncharged

conduct cannot form the basis for an order of restitution); United States v. Frith,

461 F.3d 914, 916 (7th Cir. 2006) (“Restitution must be based on the offense of

conviction, not relevant conduct.”).

          We are not unmoved by the apparent injustice our decision creates for those

victimized by crime. But at least since the Supreme Court decided Hughey almost


          2
       (...continued)
post office boxes at the Rock Springs Post Office, knowing the same to have been
unlawfully stolen and taken.” Information, United States v. Burns, 2:14-cr-
00142-ABJ (D. Wyo. July 24, 2014).
          3
         Nor do appeals to the “substantive purpose” of the restitution statute at
issue or its legislative history fare any better. The Supreme Court heard similar
arguments in Hughey and rejected them based on the plain language of the statute.
See 495 U.S. at 420–22.

                                           -9-
thirty years ago, prosecutorial decisions to frame indictments with a “view to

success at trial rather than to a victim’s interest in full compensation” are made

with a full understanding of the potential consequences. See 495 U.S. at 421.

There are tradeoffs in such decisions. Exacting a guilty plea to a lesser number of

charged crimes than the possible maximum undoubtedly limits victims’ recovery,

but it also ensures restitution for those crimes to which the defendant pleads

guilty. Moreover, prosecutors are not left without recourse. As 18 U.S.C.

§ 3663A(a)(3) states, restitution payments to “persons other than the victim of the

offense” are permissible so long as they are “agreed to by the parties in a plea

agreement.” 4

      In sum, based on Hughey, the first two prongs of plain error are met.

      B. Were Substantial Rights Affected?

      Likewise, the plain error undoubtedly affected the outcome of the

proceedings. See United States v. Burns, 775 F.3d 1221, 1224 (10th Cir. 2014)

(“An error affects substantial rights if there is a reasonable probability that the

error affected the outcome of the proceedings.”). But for the legal error,

Mendenhall would not have been ordered to pay restitution as part of his




      4
         Victims, too, may have independent recourse through a civil action. See,
e.g., Griffith v. McBride, 108 P.2d 109 (Okla. 1940) (recognizing tort of
conversion).

                                         -10-
sentence. Accordingly, his substantial rights have been affected and the third

prong of plain error review has been met.

      C. Did the Error Affect the Fairness, Integrity, or Public Reputation of
Judicial Proceedings?

      Finally, we come to the fourth prong of plain error review—did the error

affect the fairness, integrity, or public reputation of these judicial proceedings?

See Mann, 786 F.3d at 1250. This is not an easy question in a case like this one

where everyone knows that Mendenhall stole the firearms and pocketed cash from

the theft. As we mentioned, the government can avoid restitution problems in the

way it charges criminal conduct or reaches plea agreements. But as a conceptual

matter, we have already determined that where a court orders restitution in an

amount that exceeds the loss caused by a defendant’s offense in violation of 18

U.S.C. § 3663A, such an order amounts to an illegal sentence. In other cases we

have concluded that improper restitution can thereby affect the fairness, integrity,

and public reputation of judicial proceedings. See United States v. Gordon, 480

F.3d 1205, 1212 (10th Cir. 2007) (holding a restitution order in excess of the

amount authorized by 18 U.S.C. § 3663A constitutes a miscarriage of justice that

meets the requirements of plain error). Likewise, in other cases we have

concluded that unlawful restitution orders meet the requirements of plain error.

See United States v. James, 564 F.3d 1237, 1243 (10th Cir. 2009); United States




                                         -11-
v. Smith, 156 F.3d 1046, 1057 (10th Cir. 1998); United States v. Guthrie, 64 F.3d

1510, 1515 (10th Cir. 1995). These precedents are applicable here.

      In sum, all four prongs of plain error are met.

                                III. Conclusion

      For the foregoing reasons, the district court’s order is VACATED in so far

as it relates to restitution and the case is REMANDED for entry of an order

consistent with this opinion.




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