As the Supreme Court reminded us a few weeks ago, most criminal cases end in a plea. United States v. Saferstein, from the Third Circuit, is a stark reminder of how a plea can go sideways, and a lovely example of one feature of federal plea practice - appeal waivers.
GoInternet - They Made Money The New Fashioned Way
Mr. Saferstein was the CEO of GoInternet.
GoInternet may not have had the best business model.
Basically, the folks at GoInternet would cold-call small companies and offer internet services. They'd offer to send the companies a "Welcome packet" for $29.95. Then GoInternet would start charging $29.95 a month through the company's phone bill.
Companies often wouldn't see the charges, since the charges were on their phone bills.
Also, GoInternet wouldn't tell businesses it would charge them monthly, except in the welcome packet's disclosures, which were hard to find.
Also, apparently the welcome packet was designed to look like junk mail, so people would throw it out instead of opening it.
Finally, in my favorite twist, GoInternet didn't hire enough people to be able to process order cancelations. People who tried to cancel were often unable to.
It's like every time a person at GoInternet had an unpleasant call-center experience they thought: "Hey, I can monetize this!"
These sales practices did a great job at generating "customers." By 2003, GoInternet had more than 350,000 businesses signed up. It's annual revenue was more than $49 million.
The FTC Came Calling
The FTC came after GoInternet and Mr. Saferstein. The company and Mr. Safterstein agreed to change it's practices and send a postcard to every customer letting them know that they were being billed by GoInternet.
Mr. Saferstein apparently thought that agreeing to send the postcards was a good idea, because it would solve the problem with the FTC.
The problem with sending these postcards, though, was that then his customers would stop paying his company money for basically no reason.
Mr. Saferstein came up with a better idea. He would agree to send the postcards, then not send them - that way the FTC would go away, and he'd still collect the money from his customers.
He seems to have had a gift for a certain way of thinking.
Mr. Saferstein was charged with mail and wire fraud, conspiracy to commit perjury[FN1], and tax fraud.[FN2]
The Plea Agreement
He reached a plea agreement. He'd plead guilty to one fraud count and two tax counts.[FN3]
The plea agreement had an appeal waiver. In general, a person preserves his right to appeal unless he explicitly waives in it a provision of the plea agreement.
Here's how the Third Circuit described the appeal waiver:
[The plea agreement] contained an appellate waiver provision, which provided that Saferstein "voluntarily and expressly waive[d] all rights to appeal or collaterally attack" his conviction, subject to several exceptions. The waiver was "not intended to bar the assertion of constitutional claims that the relevant case law holds cannot be waived." Further, it provided an exception if the government were to appeal Saferstein's sentence and excepted a small number of enumerated claims that Saferstein would be permitted to raise on appeal: (1) that his sentence exceeded the statutory maximum for that count; (2) that the sentencing judge erroneously departed upward under the Guidelines; or (3) that the sentencing judge imposed an unreasonable sentence above the Guideline range.
At the plea hearing, though, the judge told Mr. Saferstein that the appeal waiver was a little different. Specifically, the district court said that,
the waiver "of course, is not intended to bar you [from] raising constitutional claims, and only the Court can decide whether they are constitutional claims or some other kind of claim."
This is a broader than what was written in the plea agreement.
Because of the massive loss in the case, the district court calculated Mr. Saferstein's offense level under the sentencing guidelines as a 43. With no criminal history, the advisory guidelines range was life.
The district court granted a downward variance though, to 23 years on each count, to run concurrent.
Mr. Saferstein appealed.
The question, of course, is whether he was allowed to appeal in light of the appeal waiver in the plea agreement.
Mr. Saferstein's appeal challenged whether the district court used the correct sentencing guidelines manual. The court used a manual from a date later than the date that Mr. Saferstein committed some of his crimes.
If a law changes to increase a penalty, it can't be used to punish a person for conduct that happened before the law was passed. If it does, that violates the ex post facto clause of the constitution.
Similarly, many circuits have held that using sentencing guidelines that were are more draconian and adopted after a person committed a crime violates the ex post facto clause.
So, based on that, if Mr. Saferstein has preserved his right to appeal constitutional issues, then he can win on appeal and be resentenced.
How Do You Construe An Appellate Waiver In A Plea Agreement?
Under the terms of the plea agreement, Mr. Saferstein had not preserved his right to appeal. As the district court construed the appellate waiver in the plea hearing though, he had a right to bring this appeal.
As the Third Circuit teed up the issue:
As a result [of the district court's statement], Saferstein argues that the agreement he entered into voluntarily and knowingly preserves his right to appeal constitutional claims. The Government contends that this statement is not controlling, since it misrepresents the plain language of the plea agreement, which states that the waiver was "not intended to bar the assertion of constitutional claims that the relevant case law holds cannot be waived." The district court's statement is clearly at odds with the otherwise plain and straightforward language of the agreement. That statement thus created a plausible and tangible ambiguity and seemingly expanded Saferstein's appellate rights.
So, which governs?
The Tenth Circuit has previously looked at this. In lovely language, it wrote that
[L]ogic indicates that if we may rely on the sentencing court‟s statements to eliminate ambiguity prior to accepting a waiver of appellate rights, we must also be prepared to recognize the power of such statements to achieve the opposite effect. If it is reasonable to rely upon the court‟s words for clarification, then we cannot expect a defendant to distinguish and disregard those statements of the court that deviate from the language of a particular provision in a lengthy plea agreement.
United States v. Wilken, 498 F.3d 1160, 1168 (10th Cir. 2007).
The government's argument was that a plea agreement is a contract. Normally, parol evidence of a contract - that is evidence outside of the contract itself - can't be used to interpret the contract.
But, a plea agreement, unlike a contract, requires a plea hearing under Rule 11 of the Federal Rules of Criminal Procedure.
Based on that, the court of appeals held,
[P]lea agreements must be construed to protect the defendant as the weaker bargaining party [therefore] we must find that a statement made by the sentencing court during the colloquy can create ambiguity where none exists in the plain text of the plea agreement.
Because there was ambiguity, the Third Circuit construed that ambiguity against the government, and allowed Mr. Saferstein to go forward with his appeal.
So, because of the ex post facto problem, Mr. Saferstein is going back for resentencing.
[FN1] - Mr. Saferstein asked his employees to lie in a court hearing about sending postcards.
[FN2] - Did I forget to mention that Mr. Saferstein didn't report all his income on his tax returns?
[FN3] - If there's an IRS agent assigned, and there's a plea, the government almost always wants the person to plead to a tax count. It's annoying.