The use of sentencing findings as a collateral estoppel weapon in subsequent civil litigation.

• Author: Baker, Jonathan Scott

INTRODUCTION

Should plaintiffs or defendants be permitted to use judicial findings made in the limited setting of a federal criminal sentencing hearing as a weapon in subsequent civil litigation? In the contemporary U.S. justice system, a majority of prosecutions do not actually proceed to trial, but are resolved by a guilty plea. (1) There are numerous reasons that criminal prosecutions result in guilty pleas rather than a trial. (2) The rarity of criminal trials often leaves sentencing as the most important stage of the criminal process. (3) In the federal system, before pronouncing the sentence a judge must make factual findings. These findings may relate to uncharged conduct that could later become the source of civil litigation. In many cases, because of the lack of a trial, most of the underlying facts surrounding the criminal offense are not fleshed out until the sentencing process. But in the limited context of a sentencing hearing many procedural rules that constrain litigants in civil or criminal trials are unavailable.

The federal system has a general policy favoring preclusion of issues that have been decided in previous litigation. It is well established that a criminal conviction by a jury verdict or a guilty plea has preclusive effect in subsequent civil litigation as to the issues which are identical to the matters necessarily decided by the judgment in the criminal case. (4) On the other hand, whether a federal judge's criminal sentencing findings also have preclusive effect is not a settled issue. Some federal courts in civil suits have used the doctrine of collateral estoppel to prevent the relitigation of factual issues that were previously decided in the limited context of a sentencing hearing where the civil suit was based on the same set of underlying facts as the earlier criminal prosecution. (5) This usually occurs when there is a civil suit for damages based on the same underlying set of facts as a previous criminal conviction. The most common scenario is when a civil suit is brought by a government agency based on the same underlying transaction as a previous criminal conviction. The SEC has argued that collateral estoppel should presumptively apply to sentencing findings on the same basis as it does in other contexts. (6) One commentator has even claimed that there is no reason to treat sentencing findings differently than any other type of judgments. He argues that "[i]f a defendant can be sent to prison ... on the basis of a sentencing finding, that finding should, as a general rule, also have preclusive effect in a civil suit." (7) This commentator claims that "[i]f sentencing findings are an adequate basis for keeping people in prison, surely they must be an adequate basis for taking away people's money." (8)

Part I of this Note examines the current federal sentencing process. Part II explains the current state of the law regarding the preclusive effect given to a judge's sentencing findings. Part III advocates that federal courts adopt a bright line rule that bars per se criminal sentencing findings from having preclusive effect in subsequent civil litigation. This argument is based on the Sixth (9) and Seventh Amendments, (10) as well as the problems of procedural and substantive fairness presented by this practice.

1. THE FEDERAL SENTENCING PROCESS

   In 1984, Congress adopted the Sentencing Reform Act, (11) which established the Sentencing Commission and authorized the creation of the Federal Sentencing Guidelines. (12) The purpose of this legislation was to reduce judicial discretion in fixing criminal sentences and to increase uniformity across the federal system. (13) At the time the Guidelines were adopted there was a widespread belief among policymakers that significant disparities existed among sentences for the same underlying acts both between different judges and between different regions, and that the enactment of a guidelines system was the best way to increase uniformity. (14) The Sentencing Act created the United States Sentencing Commission (the "Commission") and instructed the Commission to develop sentencing guidelines which would allow for sentences to be fair, uniform and certain across the country. Congress hoped that this would eliminate any large disparities in sentence length among defendants who had similar previous criminal histories and had committed similar offenses. (15)

   The Commission created a sentencing table to calculate the recommended sentencing range based on the defendant's conduct and the defendant's criminal history. (16) Under the Guidelines, the crime for which the defendant was convicted sets the "base" offense level. (17) Other factual circumstances surrounding the crime, such as whether the defendant violated securities laws while committing the offenses, (18) whether the defendant had a leadership role, (19) the amount of the loss, (20) or whether the defendant accepted responsibility for the crime, (21) add or subtract levels to the offense. (22) The defendant's criminal offense history is calculated based on the prior offenses committed by the offender, with greater weight given to more serious offenses and patterns of criminal behavior. (23) The offense level and the defendant's criminal history are then combined to create a sentencing range of a certain number of months. (24)

   With the help of a probation officer who prepares a presentence report, the district court makes factual findings that determine the offense level. (25) The district court judge has full discretion in determining how to accumulate and use evidence in making these factual findings. (26) Under the Guidelines prior to the decision in United States v. Booker, (27) a sentencing judge's adjustment to the base offense level based on the judge's factual findings could only be reversed if the findings were "clearly erroneous." (28) This left little to appeal, because under the pre-Booker Guidelines, if the defendant's offense level and criminal history were properly calculated, the sentence pronounced by the district court could not be reversed on appeal. (29)

   One exception under the Guidelines as originally enacted allowed sentencing judges to deviate from the Guidelines if they identified "an aggravating or mitigating circumstance of a kind, or to a degree, not adequately taken into consideration by the Sentencing Commission in formulating the guidelines that should result in a sentence different from that described [by the Guidelines]." (30) In order to justify a departure, the sentencing judge was required either to make a statement in open court or to write an opinion. (31) Appellate courts were permitted de novo review of a district court's departure from the Guidelines. (32)

   Despite the fact that the Guidelines are no longer mandatory because of the Supreme Court's decision in Booker, (33) the sentencing process still works in largely the same manner. The probation officer compiles a presentence report, the judge makes factual findings (often based in large part on the presentencing report), and the judge then determines the sentencing range based on those findings and finally pronounces a sentence. (34)

2. CURRENT STATE OF THE LAW

   After the adoption of the Sentencing Guidelines in 1984, federal courts were presented with opportunities to apply collateral estoppel to a judge's sentencing findings. Most of the early federal courts did not find application of collateral estoppel to sentencing findings to be problematic from either a prudential or constitutional perspective. The first federal appellate court to actually undertake an in-depth treatment of this issue was the Second Circuit in 1999 in SEC v. Monarch Funding Corp. (35) The Monarch Funding court reversed a district court decision granting summary judgment based on the preclusive effect of earlier sentencing findings. But instead of adopting a per se ban that would prevent sentencing findings from ever having preclusive effect, the Monarch Funding court left the door open for sentencing findings to have preclusive effect under some circumstances.

   Other courts in multiple circuits have subsequently adopted the rule of Monarch Funding.

   1. Early Cases

      Before the SEC v. Monarch Funding decision in 1999, several courts discussed the use of sentencing findings to preclude issues in subsequent litigation. Although the holdings of these cases did not hinge on whether or not sentencing findings would be given preclusive effect, several of these courts implied that they did not find the preclusive use of sentencing findings to be problematic. The most notable early case discussing preclusion based on sentencing findings was Allen v. Los Angeles. (36) In this case, Los Angeles claimed that pursuant to state law it did not have to pay for the defense of officers in a civil action because the officers had acted with "actual malice" towards a victim during a beating incident. (37) Los Angeles claimed, and the district court agreed, that the jury verdict precluded the officers from arguing that they had acted without "actual malice" as defined by California law. (38) On appeal, the Ninth Circuit affirmed the district court's judgment holding that "both the criminal verdict and the sentencing opinion are a basis for collateral estoppel on the issue of whether [the officers] acted with 'actual malice' under the [California] statute." (39)

      Although the Allen court did not use sentencing findings as the sole basis for preclusion, (40) it did not find the preclusive use of sentencing findings to be problematic as either a prudential or constitutional matter. Instead the court implied that it might have used the sentencing findings as an independent basis for collateral estoppel. (41)

      Other courts have dealt with the preclusive effect of sentencing findings in contexts different from that of a plaintiff or defendant seeking to use the findings in subsequent civil litigation. The Seventh Circuit in Levesque v...