By Jennifer S. Freel & Michael J. Murtha

On January 24, 2023, the United States Court of Appeals for the Fifth Circuit will sit en banc to decide how much deference courts should give commentary to the U.S. Sentencing Guidelines. The full Court will do so in the much-anticipated case of United States v. Vargas, 21-20140. Specifically, the Court will decide whether the Supreme Court’s decision in Kisor v. Wilkie, 139 S. Ct. 2400 (2019), which limited judicial deference to agency interpretations, extends to the Guidelines.

A change in the deference afforded to the Guidelines would have major implications for white collar offenses. The Third Circuit, which previously ruled that Kisor applied to the Guidelines, has already shown the practical effects of that decision. In United States v. Banks, 55 F.4th 246 (3d Cir. 2022), the Third Circuit considered what constitutes financial “loss” for crimes of fraud and other economic offenses. The Court noted that § 2B1.1 of the Guidelines does not define “loss,” yet the commentary stated that “loss” included “actual loss” and “intended loss.” Relying on Kisor, the Third Circuit did not defer to the commentary. Instead, it held that under § 2B1.1, loss only includes a victim’s actual, monetary loss. The “actual loss” amount is almost always less than the “intended loss,” which should result in shorter sentences for defendants. For Banks, when he is eventually resentenced, the loss amount will go from $324,000 to $0.

Background

In 1983, Congress created the U.S. Sentencing Commission and delegated to it the authority to proscribe Sentencing Guidelines for federal district courts to follow. The Guidelines were designed to create uniformity in sentencing by ascribing “scores” for each defendant’s offense level and criminal history, which together created a range of potential sentences. Throughout the Guidelines, the Sentencing Commission included commentary on how to apply specific provisions. Under then-binding 18 U.S.C. § 3553(b)(1), the Guidelines were mandatory.

Then came United States v. Booker, 125 S. Ct. 738 (2005), where the U.S. Supreme Court held that the Guidelines’ mandatory nature made them unconstitutional under the Sixth Amendment. To remedy the constitutional defect, the Court severed and excised § 3553(b)(1), resulting in the advisory nature of the Guidelines as we know them today.

Post-Booker, the Guidelines have remained virtually untouched save one-off decisions on discrete provisions. That may change, however, as circuit courts grapple with Kisor. There, the Supreme Court clarified its Seminole Rock/Auer deference doctrine, holding that judicial deference to agency interpretations of their own regulations only applies if the regulation in question is genuinely ambiguous. “[B]efore concluding that a rule is genuinely ambiguous,” the Court went on, “a court must exhaust all the ‘traditional tools’ of construction,” including careful consideration of “the text, structure, history, and purpose of a regulation.” If genuine ambiguity remains after careful consideration, a court may then defer to the agency’s interpretation, but only if that interpretation is reasonable.

So far, the Third and Sixth Circuits and a panel of the Fourth Circuit have held that Kisor altered the deference afforded to the Guidelines’ commentary. On the other hand, a different Fourth Circuit panel, along with the First, Eighth, and Ninth Circuits, have held that Kisor’s holding does not affect deference. In Vargas, the Fifth Circuit will enter this brewing circuit split.

District Court Proceedings

Andres Vargas pleaded guilty to conspiracy to possess with intent to distribute 500 grams or more of cocaine, in violation of 21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(B). At sentencing, the government asserted that Vargas qualified as a career offender under § 4B1.1(a) of the Guidelines, thereby subjecting Vargas to an enhancement to his criminal history category and offense level calculations. Specifically, the government asserted that Vargas’s prior convictions for possession with intent to distribute amphetamine and conspiracy to possess with intent to manufacture and distribute methamphetamine qualified as controlled substance offenses.

Vargas objected, asserting that he did not qualify as a career offender because his prior conspiracy convictions did not serve as predicate controlled substance offenses. In support of his objection, Vargas pointed to the discrepancy between the Guidelines and the commentary to the Guidelines:

• Under § 4B1.2(b) of the Guidelines, a “controlled substance offense” is defined as “an offense under federal or state law, punishable by imprisonment for a term exceeding one year, that prohibits the manufacture, import, export, distribution, or dispensing of a controlled substance . . . or the possession of a controlled substance . . . with intent to manufacture, import, export, distribute, or dispense.”
• Under the commentary to § 4B.2, however, the Sentencing Commission interpreted “controlled substance offense[s]” to include the “offenses of aiding and abetting, conspiring, and attempting to commit such offenses.”

Vargas argued that the text of § 4B1.2 governed, which did not include inchoate offenses in the definition of “controlled substance offense,” and that after the Supreme Court’s holding in Kisor, the commentary could not be used to expand the scope of that text. Nonetheless, the District Court overruled Vargas’s objection, and his sentencing range subsequently increased from a range of 100-125 months’ imprisonment to a range of 188-235 months’ imprisonment. Vargas was then sentenced to 188 months’ imprisonment.

Appellate Proceedings

On appeal, the Fifth Circuit affirmed. Writing for the Court, Judge Wilson began the opinion by stating that the Court previously held that “§ 4B1.1’s career-offender enhancement lawfully includes inchoate offenses” in United States v. Lightbourn, 115 F.3d 291 (5th Cir. 1997). Consequently, the Court held that Vargas’s argument was foreclosed “‘absent an intervening change in law, such as by statutory amendment, or the Supreme Court, or our en banc court.’”

The panel then rejected Vargas’s argument that an intervening change in law occurred through Kisor. Vargas argued that Kisor’s holding altered the deference afforded to the Guidelines under Stinson v. United States, 508 U.S. 36 (1993)—a case that extended Seminole Rock/Auer deference to the Guidelines. The Fifth Circuit, however, was not convinced. Because Kisor did not discuss Stinson or the Guidelines, the Court continued, its holding did not contain the “unequivocal language” necessary to overrule Lightbourn. Thus, under the rule of orderliness, the Court held that it could not overrule Lightbourn and affirmed Vargas’ sentence.

Following the panel’s decision in Vargas, Vargas filed a petition for rehearing en banc. The petition was subsequently granted, leading to the upcoming en banc argument.

The Jackson Walker team will monitor this case and let you know how and why the Court rules on this important matter.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For questions related to the U.S. Sentencing Guidelines and the cases mentioned above, please contact Jennifer Freel, Michael Murtha, or a member of the Investigations & White Collar Defense practice.

Meet Jennifer

Jennifer S. Freel is a partner in the Investigations & White Collar Defense practice of Jackson Walker’s Austin office. A former federal prosecutor, Jennifer advises businesses and individuals under investigation by the government and conducts internal investigations for companies seeking an independent party. She also represents clients in civil disputes at the pre-trial, trial, and appellate levels in state and federal court. She is an elected Fellow of the Texas Bar Foundation, a member of the Texas Supreme Court Historical Society’s Board of Trustees, a past chair of the Criminal Law Section of the Federal Bar Association, and a past president of the Austin Chapter of the Federal Bar Association.​​​​ She has been ranked among the top Texas attorneys for Litigation: White-Collar Crime & Government Investigations by Chambers USA: America’s Leading Lawyers for Business since 2021, and was named among The Best Lawyers in America for Criminal Defense: White Collar (Austin) in 2022.

Meet Michael

Michael J. Murtha is an attorney in the Trial & Appellate Litigation and Investigations & White Collar Defense practices of Jackson Walker’s Dallas office. A former federal clerk, Michael is experienced in legal drafting, courtroom hearings, complex commercial litigation, and white collar defense. Prior to Jackson Walker, Michael served as a judicial law clerk to the Honorable Edith Brown Clement of the U.S. Court of Appeals for the Fifth Circuit and to the Honorable Amos L. Mazzant, III of the U.S. District Court for the Eastern District of Texas. He also previously served as a law clerk in the Texas Office of the Solicitor General and advised Texas Senator John Cornyn’s office during the confirmation of Justice Amy Coney Barrett.