Second Circuit Holds that District Court Orders Determining Restitution Credits are Final, Appealable Orders
In United States v. Yalincak, No. 11-5446 (2nd Cir. Apr. 10, 2017) (Calabresi, Raggi, Lynch), the Second Circuit addressed a complicated issue of appellate procedure in the course of a decision on the law of restitution. Specifically, the Court weighed in on when a district court’s order crediting a defendant funds against his restitution obligations becomes a final, appealable order that cannot be revisited by the district court.
In 2006, the defendant, Hakan Yalincak, pled guilty to bank and wire fraud charges in connection with his involvement in a hedge fund. As part of his sentence, Yalincak was ordered to pay over $4 million in restitution to his victims. In 2007, Yalincak moved to have “any and all funds” recovered in bankruptcy proceedings of the hedge fund be credited to the restitution order, and he asked that the $1 million that had already been recovered in bankruptcy be credited against his restitution obligations. The government did not object to Yalincak’s motions, and the district court granted them in a text-only order on the case docket.
Years later, in 2015, the district court vacated its 2007 order after it realized that its initial order had likely been based on a misinterpretation of the Mandatory Victims Restitution Act (“MVRA”), 18 U.S.C. § 3664(j)(2). The MVRA provides that restitution obligations “shall be reduced by any amount later recovered as compensatory damages for the same loss by the victim in . . . any Federal proceeding.” Id. (emphasis added). The district court’s 2007 order allowed Yalincak to receive credit for all of the funds collected in the bankruptcy proceeding, even though only about a third of those funds actually went to victims of the fraud. Relying on its “inherent power” to “correct mistakes made in its handling of a case,” and its “power to grant relief from erroneous interlocutory orders,” the district court reduced the amount of restitution credits to account for the portion of the recovery that had not gone to the victims.
On appeal, the Second Circuit reversed the district court’s latest restitution order. Even though the panel, the defendant, and the government all agreed that the 2007 credits had been “erroneously granted,” because they encompassed administrative expenses that were not paid directly to victims, the Second Circuit nevertheless reversed because it held that an order resolving a motion for credit under § 3664(j)(2) is an appealable final order.
Writing for the panel, Judge Lynch noted that when the district court granted Yalincak’s motion for credit in 2007, “it made a conclusive determination as to Yalincak’s entitlement to credit” for the roughly $1 million collected in the bankruptcy proceedings. Although the 2007 order “did not dispose of the restitution entirely,” it was still a “final decision as to Yalincak’s claim regarding the proper accounting for particular funds.” Judge Lynch acknowledged that so long as a defendant still has outstanding restitution obligations “the credit determinations remain somewhat academic” but he also noted the concrete implications restitution determinations have for defendants:
By permitting defendants to move for a determination of credit, courts have recognized that persons subject to restitution orders are entitled to know, as they lead their lives and make economic decisions over the long duration of restitution orders, the extent of their remaining restitution obligations. That procedure would be pointless if decisions to grant or deny restitution credits were merely tentative predictions or estimates, subject to revision indefinitely if a district court sua sponte changed its mind years after the credit was awarded, and incapable of being finalized by appeal.
The Yalincak decision represents a sensible if imperfect solution to a difficult problem. On the one hand, the Second Circuit allowed what all parties—including the defendant and the district court below—considered an incorrect decision to remain in effect. As a result, victims of the fraud will likely receive less in restitution funds than they would have under a proper application of the MVRA. Yet the Court’s decision recognizes the need for individuals subject to restitution obligations to have a degree of certainty to allow them to “lead their lives and make economic decisions” going forward.
Yalincak can be read in combination with a recent Supreme Court decision, Manrique v. United States, which held that when a court imposes a sentence but defers determination of restitution until a later date, a defendant must file a separate notice of appeal as to the restitution order if he wishes to challenges the restitution amount. Taken together, Yalincak and Manrique serve as practical reminders to raise any and all arguments before the district court issues a restitution order and to file timely notices of appeal—perhaps multiple notices of appeal—from each of those orders once they are entered.