The federal circuit courts are irreconcilably split on a weighty question: How much deference should a sentencing court give to U.S. sentencing guidelines commentary? Some circuit courts apply a strong deference to commentary; other courts favor a less deferential standard. The final answer—to be determined by the Supreme Court—will have profound implications for the way sentences are calculated in federal criminal cases. Until SCOTUS settles the divide among the circuits, confusion will reign in regard to whether and to what degree guideline commentary should be applied when sentencing criminal defendants.
The issue is a critical one and particularly important in white collar cases. Fraud and theft prosecutions comprise a significant portion of the Justice Department’s caseload, and their sentences are governed by Section 2B1.1 of the U.S. Sentencing Guidelines Manual, which adjusts a defendant’s sentence—upward or downward—based on the amount of a victim’s “loss.” As every federal prosecutor and defense attorney knows, the higher a victim’s calculated monetary loss amount, the higher the sentencing range under Section 2B1.1. A key question in making that calculation is whether a defendant should be held liable for “intended” loss—a concept mentioned only in the commentary and not in guideline provision itself. The guideline provides only that the offense level is increased based on the amount of financial “loss.” The commentary, on the other hand, interprets the term “loss” to mean “actual or intended loss, whichever is greater.” Federal prosecutors often leverage the “intended” loss option to inflate a defendant’s sentencing range, sometimes to astronomical levels, in order to secure a plea deal or punish a defendant at sentencing, even where a victim has sustained a far lesser monetary loss than “intended,” or no financial loss at all. The discrepancy in prison time between the two can be significant, and on occasion can be quite unreasonable and unfair.
Imagine, for example, that a thief sets his sights on stealing the contents of the vault at the Bellagio in Las Vegas, which he believes to be worth hundreds of millions of dollars. But, to the thief’s chagrin, after being caught in the act, he discovers that the stolen stash was all counterfeit, resulting in no loss to the casino. In that case, if the commentary’s “intended” loss provision was applied, the thief would be facing about a decade in prison—a sentence driven by what the aspiring Ocean’s Eleven cast member intended to steal, regardless of the fact that his victim lost nothing and is laughing all the way back to the vault. Though this may be an extreme example, it makes the point: application of Section 2B1.1’s commentary can significantly increase a defendant’s sentence even though the guideline itself instructs courts only to consider the amount of the victim’s “loss.”
The first appellate court to categorically reject the commentary’s intended loss approach was the Third Circuit in United States v. Banks in 2022. In one fell swoop, Banks put the kibosh on the use of “intended” loss in calculating guideline ranges, at least in the Third Circuit. In holding that “loss” under Section 2B1.1 refers only to the actual loss suffered by a victim and not intended loss, the court deferred to the guideline itself, but not to the commentary’s expansive definition.
The Banks court based its holding on the Supreme Court’s recent decision in Kisor v. Wilkie, which reduced the amount of deference courts may give to an agency’s interpretation of its own regulations. Kisor held that before a court may defer to the agency’s interpretation of its regulation, it must exhaust all the traditional tools of construction and find the regulation to be “genuinely ambiguous.” Prior to Kisor, the Third Circuit would have followed United States v. Stinson, which held that guideline commentary is authoritative unless it violated the Constitution, violated a federal statute, or was inconsistent with, or a plainly erroneous reading of, the applicable guideline. At bottom, the Banks court interpreted Kisor as extending its “genuinely ambiguous” test to the guidelines and concluded that the term “loss,” as used in Section 2B1.1, was not “genuinely ambiguous.” Therefore, the Third Circuit refused to defer to the commentary and rejected the enhancement of a defendant’s sentence based on the intended loss to the victim.
The Fourth, Sixth, Ninth, and Eleventh Circuits all agree with the Third Circuit’s position that the Supreme Court in Kisor replaced Stinson’s highly deferential standard—to guideline commentary—with a less deferential one. However, a number of other circuit courts have taken the opposite view. According to the First, Second, Fourth (a different panel), Fifth, Seventh, and Tenth Circuits, Kisor does not extend to the guidelines and, therefore, Stinson continues to require strong deference to guideline commentary. Notably, the discrepancy in the Fourth Circuit arises from two cases, with separate panels, rendered about two weeks apart. Both cases relied on Stinson for their holding but one panel suggested that Kisor abrogated Stinson while concluding that the result of their decision would be the same regardless.
Most recently, on July 24, 2023, the Fifth Circuit issued its long-awaited en banc decision in United States v. Vargas. The case involved the enhancement of a defendant’s sentence under the career offender Guideline. Whereas the guideline itself is silent on the treatment of conspiracies, its commentary includes them and thus subjects a defendant to increased prison time. In deferring to the commentary, the Fifth Circuit held that it is bound to follow Stinson, “like night follows day.” In doing so, the court solidified its prior holding that Stinson was not overruled or modified by Kisor, and that Stinson still compels deference to the commentary. Under Stinson, the court went on to explain, the commentary is authoritative unless it is inconsistent with, or a plainly erroneous reading of, the applicable guideline. The Vargas court found that the guideline’s silence in regard to conspiracies does not amount to an “irreconcilable variance” or “flat inconsistency” with the commentary's inclusion of them. Further, the court said, its holding would be the same even under Kisor, assuming arguendo that Kisor had modified or overruled Stinson; this was because it found the guideline to be “genuinely ambiguous” in regard to conspiracies. The Fifth Circuit in Vargas therefore held en banc that the commentary is authoritative unless it violates the Constitution or a federal statute, or is inconsistent with, or a plainly erroneous reading of, the guideline it interprets.
Whether the Fifth Circuit, or the Supreme Court, would reach the same answer in regard to Section 2B1.1 and its commentary—expanding loss to include “intended” loss—remains to be seen. Applying Stinson, however, there is a strong argument to be made that the commentary’s addition of intended to the definition of loss is inconsistent with the plain meaning of the word “loss,” which, at least in my mind, doesn’t contemplate what someone may have been intending or thinking. Regardless, this much is certain: The Fifth Circuit’s en banc decision in Vargas sets the stage for SCOTUS to address the split in the circuits in regard to the amount of weight to be given to commentary, particularly in light of Kisor. Some Justices on the Court might view this as a perfect opportunity to apply the principle of separation of powers and scale back, or at least restrict, the Sentencing Commission’s interpretative power over regulations established under congressional authority.
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