§200 Offense Conduct, Generally
(Chapter 2) (U.S.S.G. §§2A1-2)
1st Circuit upholds calculation of volume of commerce affected by price-fixing conspiracy. (200) Defendant was involved a conspiracy to fix the prices of shipping services to Puerto Rico. The district court applied a 12-level increase under § 2R1.1(b)(2)(F), finding that more than $500 million in commerce was affected by the conspiracy. Defendant argued that the court erroneously included commercial activity that took place before 2005 when he joined the conspiracy, and other commerce that was unaffected by the conspiracy. The First Circuit found no error. First, the record showed that the district court would have reached its more-than-$500 million number even without including commerce before 2005. As for “unaffected” commerce, defendant's company had total revenue between 2005 and 2008 of $565 million, and the court used this number to conclude that the 12-level increase applied. Although defendant claimed that certain transactions should have been excluded, defendant failed to show that these transactions were “completely unaffected” by the conspiracy. U.S. v. Peake, __ F.3d __ (1st Cir. Oct. 14, 2015) No. 14-1088.
2nd Circuit holds that “volume of commerce” includes sales made at or below target price. (200) Defendants were convicted of conspiracy to fix prices in the market for ferrosilicon. The 1990 version of § 2R1.1(b)(2) provides for offense level increases based on the “volume of commerce” attributable to the defendant. The district court construed the term “volume of commerce” narrowly to include only those ferrosilicon sales made at or above the target price during times when the conspiracy was “in effect.” The Second Circuit reversed. A price-fixing conspiracy can affect prices even when it falls short of achieving the conspirators’ target price. Sales can be “affected” by a conspiracy when the conspiracy merely acts upon or influences negotiations, sales prices, the volume of goods sold, or other transactional terms. While a price-fixing conspiracy is operating and has any influence on sales, it is reasonable to conclude that all sales made by a defendant during that period are “affected” by the conspiracy. Thus, once the court found that the price-fixing conspiracy was successful during two periods of time, it was error to calculate the effect on commerce solely in terms of the sales made at or above the target price. U.S. v. SKW Metals & Alloys, Inc., 195 F.3d 83 (2d Cir. 1999).
2nd Circuit says court may consider sales that were not above price set by conspiracy. (200) Defendants were convicted of conspiracy to fix prices in the market for ferrosilicon, and were acquitted of conspiring to fix the price of silicon metal. Section 2R1.1(b)(2) provides for offense level increases based on the “volume of commerce” attributable to the defendant. The district court refused to consider the volume of commerce affected by the silicon metal conspiracy, finding that although the price-fixing meetings occurred, the evidence “[fell] short of establishing a successful price-fixing agreement … that produced sales of silicon metal at or above an illegally-fixed floor price.” The Second Circuit found that the district court misunderstood its authority to take account of the acquitted conduct. Entry into an agreement to fix prices—even if the implementation of such an agreement is unsuccessful—is illegal conduct under the Sherman Act, 15 U.S.C. § 1. If the conspirators agreed to fix prices of silicon metal, and the conspiracy affected prices, the district court may consider this as relevant conduct for sentencing purposes, without regard to whether the sales were at or above the price fixed by the illegal agreement. U.S. v. SKW Metals & Alloys, Inc., 195 F.3d 83 (2d Cir. 1999).
6th Circuit says volume of commerce in price-fixing case includes all sales regardless of targeted price. (200) Defendants, an oil company and its president, conspired with other dealers to control retail gasoline prices in one town over a four-year period. Because of dealer cheating and other factors, the conspiracy was only partially effective. Section 2R1.1 bases a conspirator’s fine on the “volume of commerce,” which is defined as the conspirator’s volume of commerce that was “affected” by the anti-trust violation. The district court interpreted “volume of commerce” to include only the sales made by defendant when the conspirators successfully achieved their target prices. The Sixth Circuit disagreed, holding that the volume of commerce includes all sales made by the defendant during the conspiracy, regardless of the target price. It would be anomalous to make price-fixing illegal per se, but to provide for a fine only if it is successful. This interpretation is also supported by the Sentencing Commission’s commentary to §2R1.1. U.S. v. Hayter Oil Co. of Greeneville, Tenn., 51 F.3d 1265 (6th Cir. 1995).
7th Circuit says defendant may rebut presumption that all sales were “affected” by price-fixing conspiracy. (200) Defendants conspired to fix global prices and allocate the sales volume of lysine, an amino acid that is added to animal feed. Guideline § 2R1.1 increases a defendant’s offense level based on the dollar value of the volume of commerce affected by the conspiracy. In U.S. v. Hayter Oil Co., 51 F.3d 1265 (6th Cir. 1995), the Sixth Circuit rejected an argument that “affected commerce” includes only those goods sold at or above the targeted price and held that “affected commerce includes all sales made within the scope of the conspiracy. In U.S. v. SKW Metals & Alloys, 195 F.3d 83 (2d Cir. 1999), the Second Circuit also adopted a broad reading of “affected,” but refused to adopt the categorical position that all sales be counted regardless of whether they were “affected” by the conspiracy. The Seventh Circuit agreed with the Second Circuit in SKW Metals that a court should presume that all sales during the period of a price-fixing conspiracy have been affected by the illegal agreement. However, as SKW Metals recognized, there may be “odd” sales made during the term of the conspiracy that are completely unaffected by the conspiracy (e.g. sales made before new prices schedules are issued). Sales that were entirely unaffected by the conspiracy do not harm consumers and therefore should not be counted for sentencing. The defendant bears the burden of proving such unusual sales by a preponderance of the evidence. U.S. v. Andreas, 216 F.3d 645 (7th Cir. 2000).
7th Circuit holds “bid rigging” means bid rotation. (200) Defendant, vice-president of a company that makes steel drums, conspired with other companies to sell certain drums at identical prices to two large buyers. The district court enhanced defendant’s sentence under § 2R1.1(b)(1) for submission of “noncompetitive bids.” The Seventh Circuit reversed, holding that the term “noncompetitive bids” or “bid rigging” under the guidelines means bid rotation. Bid rotation is what application note 6 calls the submission of “complementary bids”: for each job the competitors agree which of them will be the low bidder, and the others submit higher bids to make sure the designated bidder wins. There was no bid rotation here; two purchasers solicited bids and the conspirators submitted identical bids. This practice is indistinguishable from ordinary price fixing. The court’s interpretation was a “best guess” as to the meaning of the antitrust guideline. The court invited the Sentencing Commission to rewrite the guideline, stating that its treatment of bidding was “a muddle.” U.S. v. Heffernan, 43 F.3d 1144 (7th Cir. 1994).
7th Circuit applies antitrust guidelines, rather than fraud guidelines, to mail fraud counts. (200) Defendant was convicted of one count of criminal antitrust conspiracy for fixing the price of new steel drums and two counts of mail fraud for concealing and making false statements to cover the collusion. The 7th Circuit held that §2R1.1, the antitrust guideline, rather than §2F1.1, the fraud guideline, should have applied to the mail fraud counts. The nature of the conduct charged in the mail fraud counts dealt with price-fixing rather than with mail fraud. Therefore, application note 13 to §2F1.1 required that defendants be sentenced under §2R1.1, even though the Statutory Index lists §2F1.1 as the guideline ordinarily applicable. The court noted that its holding was limited to the facts of the case, and was not a bright-line ruling for all indictments charging price-fixing and mail fraud. U.S. v. Rubin, 999 F.2d 194 (7th Cir. 1993).
8th Circuit approves upward variance based on policy disagreement with antitrust guideline. (200) Defendant pleaded guilty to two counts of price fixing and one count of bid rigging. His 48-month sentence was the result of an upward variance based primarily on defendant's lack of remorse and the court's disagreement with § 2R1.1, the antitrust guideline. The Eighth Circuit held that defendant's sentence was substantively reasonable. Defendant's primary complaint was that the length of his sentence equaled the longest sentence ever imposed in an antitrust case. However, one of the main reasons for the variance was the court's belief that the antitrust guidelines were too lenient. The district court gave cogent reasons for its policy disagreement by comparing the antitrust guidelines to the fraud guidelines, which attack a similar societal harm. The district court also tied its policy disagreement to the specific facts involved in defendant's case. The district court's policy disagreement was based in large part upon case-specific circumstances, and the end result was an antitrust sentence more comparable to a fraud sentence based upon a similar amount of loss. U.S. v. VandeBrake, 679 F.3d 1030 (8th Cir. 2012).
8th Circuit upholds determination of volume of commerce in antitrust case. (200) Defendants pled nolo contendere to conspiring to fix prices. They argued that the district court erred in computing the volume of commerce involved in their case under §2R1.1(b)(2). The 8th Circuit affirmed. Although defendant’s expert testified that all pre-April 1987 sales must be excluded from the computation, the district court did not err in rejecting this testimony. The record was clear that the conspiracy was underway in May of 1986 when the new price books were introduced and that significant sales were made between May 1986 and April of 1987. U.S. v. Haversat, 22 F.3d 790 (8th Cir. 1994).
9th Circuit says Appendix A is not mandatory; court should have used guideline for impeding federal officer. (200) Defendant argued that the court should have used guideline § 2A2.4, which deals with obstructing or impeding federal officers, rather than relying on the statutory index to the guidelines which referred to the obstruction section, 2J1.2. The Ninth Circuit agreed, holding that the guidelines cross-referenced in the statutory index are not mandatory. Appendix A says that “if in an atypical case the guideline section indicated for the statute of conviction is inappropriate because of the particular conduct involved [the court should] use the guideline section most applicable to the nature of the offense conduct charged in the count of which the defendant was convicted.” The Ninth Circuit held that defendant’s conduct was more analogous to impeding a federal officer than to obstructing justice, and therefore remanded the case for resentencing under § 2A2.4. U.S. v. Fulbright, 105 F.3d 443 (9th Cir. 1997), overruled on other grounds by U.S. v. Heredia, 483 F.3d 913 (9th Cir. 2007).
11th Circuit says “volume of commerce” includes all sales during effective period of price-fixing conspiracy. (200) Section 2R1.1, the guideline applicable to price-fixing conspiracies, provides for an enhancement based upon “the volume of commerce attributable to the defendant.” In U.S. v. Hayter Oil Co., 51 F.3d 1265 (6th Cir. 1995), the Sixth Circuit defined the volume of commerce to include “all sales of the specific types of goods or services which were made by the defendant … during the period of the conspiracy, without regard to whether individual sales were made at the target price.” In U.S. v. SKW Metals & Alloys, 195 F.3d 83 (2d Cir. 1999), the Second Circuit did not fully embrace this approach, refusing to assume all sales within the period set forth in the indictment should be included. Instead, if the conspiracy was a “non-starter, or if during the course of the conspiracy there were intervals when the illegal agreement was ineffectual,” then such sales are not “affected by” the illegal agreement. The Eleventh Circuit agreed with the Second Circuit’s approach. Moreover, “[s]ales can be ‘affected’ by a conspiracy when the conspiracy merely acts upon or influences negotiations, sale prices, the volume of goods sold, or other transactional terms. While a price-fixing conspiracy is operating and has any influence on sales, it is reasonable to conclude that all sales made by defendants during that period are ‘affected’ by the conspiracy.” The panel rejected defendants’ claim that their conspiracy was a non-starter, given that defendants’ sales during the period in question were at or near the agreed-upon prices. U.S. v. Giordano, 261 F.3d 1134 (11th Cir. 2001).
11th Circuit finds no requirement to use lighter sentence from different statute. (200) Defendants were convicted of assisting in the unauthorized decryption of satellite cable programming in violation of 47 U.S.C. § 605(e)(4). They were sentenced under section 2B5.3, the guideline applicable to violations of 47 U.S.C. § 605. Defendants argued that because their conduct could have been prosecuted under 18 U.S.C. § 2512, a part of the Wiretap Act that overlaps § 605(e)(4), the district court should have imposed the lighter sentence they would have received under that guideline. The 11th Circuit rejected this contention. When an act violates more than one criminal statute, the government may prosecute under either so long as it does not discriminate against any class of defendants. In exercising that discretion, the prosecutor may consider the penalties available upon conviction. The guidelines do not limit this prosecutorial discretion. U.S. v. Howard, 13 F.3d 1500 (11th Cir. 1994).
Commission adopts guidelines for crimes affecting transportation systems. (200) The USA PATRIOT Reauthorization Act and the Safe, Accountable, Flexible, Efficient Transportation Equity Act created several new offenses and increased the penalties for others. To implement these Acts, the Commission amended the guidelines to reference the new statutes to existing guidelines. The amendments affect guideline §§ 2A1 (Homicide), 2A2 (Assault), 2A3-6 (Obstruction, Threats), 2B1.1 (Theft, etc.), 2B2.3 (Trespass), 2C1.1 (Bribery, Extortion), 2K1.4 (Arson, Explosives), 2M6.1 (Weapons of Mass Destruction), 2Q1.1 (Toxic Substances), and 2X1.1 (Attempt and Conspiracy). Amendment 699, effective November 1, 2007
Commission proposes increased penalties for nuclear, biological and chemical weapons. (200) Section 1423(a) of the National Defense Authorization Act for Fiscal Year 1997 contained a “sense of Congress” statement that guideline penalties are inadequate for certain offenses involving nuclear, chemical and biological weapons, materials, or technologies. In response, the Commission proposes to increase by four levels the base offense levels in §§ 2M5.1 and 2M5.2. 2001 Proposed Amendment 19.