Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

Plaintiffs delivered artifacts from a famous shipwreck to Debtor for display and, according to Debtor, sale in Debtor’s jewelry store. The store went out of business. When Debtor returned the artifacts, an emerald pendant and musket balls were missing. Plaintiffs filed a complaint alleging breach of fiduciary duty, common law conversion, and statutory conversion or negligence. A Michigan state court found that Debtor’s failure to respond to any written discovery requests, file a response to the Motion for Summary Disposition, and appear at the hearing were sufficient basis for entry of summary disposition and awarded $42,706.10. The judgment did not specify the claim upon which it was based. Debtor filed a voluntary Chapter 7 bankruptcy petition. Plaintiffs filed an adversary complaint seeking to have the debt declared nondischargeable under 11 U.S.C. 523(a)(4), stating that Debtor’s actions constituted “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” The bankruptcy court granted Plaintiffs summary judgment. The Sixth Circuit reversed. The bankruptcy court erred when it held that the issue of fraud was “necessarily determined” by the state court; the state court judgment cannot have issue preclusive effect as to this element for nondischargeability under the embezzlement portion of section 523(a)(4). View "In re: Dantone" on Justia Law

Nixon worked at a law office, doing clerical and bookkeeping work. While the attorney was out of the office for medical reasons, his bank informed him that he was delinquent in paying back his line of credit. An investigation by a forensic accountant uncovered that Nixon had made thousands of dollars of personal charges on the firm’s credit card and had borrowed thousands more, all of which was unauthorized according to the testimony of the attorneys. The FBI charged, and Nixon was convicted of,11 counts of wire fraud, 18 U.S.C. 1343; two counts of bank fraud, 18 U.S.C. 1344; three counts of aggravated identity theft, 18 U.S.C. 1028A; and one count of using an unauthorized access device, 18 U.S.C. 1029(a)(2). She was sentenced to 54 months of imprisonment and ordered to pay $55,236.30 in restitution. The Sixth Circuit affirmed with respect to 16 counts, rejecting assertions concerning evidentiary rulings, but reversed as to the final count. The government conceded that it failed to present evidence at trial that the card was an “unauthorized access device.” The term is defined under the statute as “any access device that is lost, stolen, expired, revoked, cancelled, or obtained with intent to defraud.” View "United States v. Nixon" on Justia Law

Semrau, a Ph.D. in clinical psychology, owned companies that provided psychiatric care to nursing home patients in Tennessee and Mississippi, using contracting psychiatrists who submitted records describing their work. The companies then billed the services to Medicare or Medicaid through private insurance carriers. Services are categorized into five-digit Current Procedural Terminology Codes, published by the American Medical Association. The Centers for Medicare and Medicaid Services sets reimbursement levels for each code as well as “relative value units” corresponding to the amount of work typically required for each service. After audits indicated that the companies had been billing at a higher rate than could be justified by the services actually performed, “upcoding,” Semrau was convicted of healthcare fraud, 18 U.S.C. 1347, and was sentenced to 18 months of imprisonment and ordered to pay $245,435 in restitution. The Sixth Circuit affirmed, rejecting Semrau’s claim that results from a functional magnetic resonance imaging lie detection test should have been admitted to prove the veracity of his denials of wrongdoing. There was ample evidence that Semrau was aware of accepted definitions of the CPT codes; he expressly agreed not to “submit claims with deliberate ignorance or reckless disregard of their truth or falsity.” View "United States v. Semrau" on Justia Law

McAllister, a former FBI agent, was charged with making material misrepresentations on loan documents to obtain real estate loans for rental properties, and making material misrepresentations on official documents during bankruptcy proceedings. At trial he raised a Batson challenge to the government’s peremptory strike of two African-Americans in the jury pool. The government offered race-neutral reasons for striking the jurors: one had a conviction; the other was unemployed and had a military background so that he might be sympathetic to the defendant. The district court summarily accepted those reasons, by stating, “All right.” The court also excused a defense witness who had notified the court of his intention to invoke the Fifth Amendment in response to all questions asked by the defense. McAllister was convicted of 15 counts of wire fraud, 18 U.S.C. 1343, and three counts of bankruptcy fraud, 18 U.S.C. 151(3). The Sixth Circuit affirmed in part, rejecting claims of prosecutorial and judicial misconduct and challenges to evidentiary rulings, but remanding for findings concerning racial animosity that might entitle McAllister to a new trial. View "United States v. McAllister" on Justia Law

Federal officers applied for a warrant to search the offices of Fair Finance in Akron, as part of an investigation into its owner, Durham, who was suspected of employing the company to engage in a Ponzi scheme. A Magistrate granted a warrant and, at the government’s request, sealed the file. Officers executed the search. The warrant and inventory of seized items were placed in the sealed file. Newspapers requested an order unsealing the files, arguing that they had a right of access under common law and the First Amendment. The district court denied the motion. After an indictment issued, the court granted the government’s motion to unseal the face sheet of the warrant, the form application (excluding the affidavit in support of the application), the inventory, two attachments to the warrant and application, the motion to seal the documents, and the order granting that motion. The affidavit filed in support of the warrant application and the docket sheet remained sealed. The newspapers are no longer contesting the sealing of the affidavit. The Sixth Circuit affirmed. The First Amendment right of access does not permit the newspapers to obtain the documents filed in connection with these warrant proceedings.View "In re: Search of Fair Finance " on Justia Law

In 2007, Fifth Third loaned Buford $406,000 in exchange for a mortgage on property that Buford purportedly owned. Fifth Third obtained a title-insurance policy from Direct Title, an issuing agent for Chicago Title. Direct Title was a fraudulent agent; its sole “member” was the actual title owner of the property and conspired with Buford to use that single property as collateral to obtain multiple loans from different lenders. When creditors foreclosed on the property in state court, Fifth Third intervened and asked Chicago Title to defend and compensate. Chicago Title refused to defend or indemnify. Chicago Title sought to avoid summary judgment, indicating that it needed discovery on the questions whether “Fifth Third failed to follow objectively reasonable and prudent underwriting standards” in processing Buford’s loan application and whether Direct Title had authority to issue the title-insurance policy. The district court granted Fifth Third summary judgment. The Sixth Circuit affirmed, noting that “When a party comes to us with nine grounds for reversing the district court, that usually means there are none.”View "Fifth Third Mortg. Co. v. Chicago Title Ins. Co." on Justia Law

Watkins, an African-American, worked for the school district, overseeing security systems. Fultz supervised Watkins and, relying on Watkins’s advice, Fultz awarded Vision a $182,000 annual contract for service of security cameras. Vision’s president, Newsome, testified that Watkins called her and talked about a “finder’s fee.. Newsome went to Cleveland for a customer visit. She e-mailed Watkins and he replied: “Absolutely$.” Newsome believed that Watkins expected her to pay him at their meeting. Newsome notified Fultz. At the meeting, Watkins requested “an envelope.” After Fultz contacted police, the FBI recorded meetings at which Newsome gave Watkins $5,000 and $2,000. A white jury convicted on two counts of attempted extortion “under color of official right” (Hobbs Act, 18 U.S.C. 1951), and one count of bribery in a federally funded program, 18 U.S.C. 666(a)(1)(B). The court determined a total offense level of 22, applying a two-level enhancement for obstruction of justice, another two-level enhancement for bribes exceeding $5,000, and a four-level enhancement for high level of authority, plus an upward variance of 21 months under 18 U.S.C. 3553(a), and sentenced Watkins to six years’ incarceration. The Sixth Circuit affirmed, rejecting challenges to jury instructions, sufficiency of the evidence, the jury’s racial composition, and the reasonableness of the sentence.View "United States v. Watkins" on Justia Law

Brinley operated an investment company; his investors were friends, neighbors, and family. He told them that the certificates of deposit were FDIC insured and that their principal was not at risk, and promised above-market returns. He used their money to pay returns to other investors, overhead and living expenses. Brinley lied to investors who attempted to withdraw funds. In 2009, unable to continue the scheme, Brinley, accompanied by his attorney confessed that he owed investors approximately four million dollars. He entered a plea of guilty to wire fraud, 18 U.S.C. 1343. The probation officer calculated a Guidelines sentence range of 63-78 months. Brinley presented evidence of depression and argued for downward departure pursuant to U.S.S.G. 5K2.16 for acceptance of responsibility. The court rejected a claim that the offense would not have been detected absent disclosure, concluded that the guidelines failed to capture the severity of the offense, given the number and vulnerability of the victims, the need for deterrence, and the amount of loss, and imposed a sentence of 108 months. The Sixth Circuit affirmed, rejecting arguments that the court failed to notify of intent to vary upward, gave unreasonable weight to certain factors, considered impermissible factors, and imposed an unreasonable sentence. View "United States v. Brinley" on Justia Law

As one of the largest developers in Cincinnati, Erpenbeck defrauded buyers and banks out of nearly $34 million. Erpenbeck pled guilty to bank-fraud in 2003, received a 300-month sentence, and was ordered to forfeit proceeds: $33,935,878.02, 18 U.S.C. 982(a). The FBI later learned that Erpenbeck had given a friend more than $250,000 in cash. The friend put the cash in a cooler and buried it on a golf course. Agents unearthed the cooler. The government sought forfeiture of the cash and posted online notice in 2009. Three months later, the trustee of Erpenbeck’s bankruptcy estate contacted an Assistant U.S. Attorney, told her the estate had an interest in the cash and asked about the government's plans. The attorney did not mention the forfeiture proceedings. Because no one asserted an interest, the district court entered an order vesting title to the cash in the government, 21 U.S.C. 853(n)(7). The trustee sought to stay the order in November 2010. The district court denied the motion because the trustee did not file a timely petition. The Sixth Circuit vacated. Even though the trustee’s interest in the cash was "far from a mystery," the government did not take even the "modest step" of sending a certified letter. View "United States v. Erpenbeck" on Justia Law

In the 1990s debtors owned a business that failed and incurred liabilities from unpaid taxes. They had a monthly payment obligation to the IRS. Husband obtained employment; 2003 to 2009, his yearly gross income was between $53,000 and $59,000. In addition, he receives $1,300 per month from a settlement annuity. Wife was employed as a bookkeeper until 1999. In 2000, she pled guilty to felony embezzlement of funds from her former employer and was sentenced to probation and required to pay restitution of $800 per month. Before her indictment wife obtained employment as a bookkeeper for plaintiff, began embezzling, and deposited stolen funds to Debtors’ joint bank accounts. By 2006, she had embezzled $283,391.88 from plaintiff and forged credit card purchases of $2,821.43. In 2007, she embezzled $328,516.10. In 2008, she embezzled $11,230.21. She stole goods valued at $127,156 from her employer. Debtors spent accordingly. The Bankruptcy Court entered an order excepting debt owed to plaintiff from discharge under 11 U.S.C. 523(a)(6), finding that husband conspired with wife to convert embezzled funds and other property. The Sixth Circuit affirmed, holding that Debtors’ conduct constituted willful and malicious injury to plaintiff. View "In re: Cottingham" on Justia Law