[P U B L IS H ]
IN THE UNITED STATES COURT OF APPEALS
FILED
F O R THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
JULY 9, 2007
THOMAS K. KAHN
N o . 06-11136
CLERK
D . C. Docket No. 04-20817-CR-KMM
U N IT E D STATES OF AMERICA,
Plaintiff-Appellee,
versus
H E R M A N ALBERTO LOZANO,
a.k.a. Alberto Cubillos,
a.k.a. Cubillos A. Hermann,
Defendant-Appellant.
No. 06-11137
D.C. Docket No. 04-20817-CR-KMM
U N IT E D STATES OF AMERICA,
P la in tif f - A p p e lle e ,
versus
X A V IE R DARIO LOZANO,
a.k .a. Javer Lozano,
D e f e n d a n t- A p p e lla n t.
A p p e als from the United States District Court fo r the Southern District of Florida (J u ly 9, 2007) B e fo r e CARNES and WILSON, Circuit Judges, and STAGG,* District Judge.
S T A G G , District Judge: I. FACTUAL AND PROCEDURAL BACKGROUND S u p lim et Corporation was a Miami-based company acting as a wholesale d is tr ib u to r of cell phone parts and accessories. In January of 2003, police received in fo rm atio n that Suplimet was selling counterfeit items, and on that basis, co n d u cted a controlled purchase of counterfeit cell phone parts. Following the p u r ch a s e, the authorities requested permission to search Suplimet's warehouse.
X a v ie r Lozano, who was present, advised police that he could not authorize a s ea rc h , as he was only Suplimet's sales manager. Instead, he contacted his brother H er m an , the owner of Suplimet, for permission to search and obtained Herman's co n sen t. The search yielded forty-one boxes of counterfeit goods. However, no c rim in a l charges were filed at this time.1 * Honorable Tom Stagg, United States District Judge for the Western District of Louisiana, sitting by designation.
1 Additionally, in August of 2003, United States Bureau of Immigration and Customs Enforcement agents seized forty-three boxes of counterfeit cell phone parts shipped from China.
D u rin g 2004, authorities conducted two controlled purchases of counterfeit cell phone parts from two Miami retailers. They discovered that the counterfeit ite m s originated from Suplimet. In September of 2004, agents purchased fifty co u n terfeit cell phone batteries from Suplimet. Armed with a warrant, agents again search ed Suplimet's warehouse and seized approximately 85,000 pieces of c o u n te rf eit cell phone parts. On October 21, 2004, Herman and Xavier were in d icted for conspiracy to traffic in counterfeit goods and trafficking in counterfeit g o o d s , in violation of 18U.S.C. §§ 371 and 2320(a). In May of 2005, both d efen d an ts pled guilty.
At the sentencing hearing, both Herman and Xavier agreed that United S ta te s Sentencing Guidelines ("U.S.S.G.") § 2B5.3 applied to their sentence calcu latio n s. Section 2B5.3 is used to calculate the offense level for a conviction stem m in g from the counterfeiting and/or infringement of a trademark or copyright.
T h is provision provides for a base offense level of 8, which is then enhanced on th e basis of the amount of the infringement, pursuant to U.S.S.G. § 2B1.1.2 The P r e s e n te n ce Report ("PSR") attributed a loss amount of $10,177,485 to the L o zan o s, which resulted in a 20-level enhancement under section 2B1.1. It also reco m m en d ed a 2-point enhancement for both Herman and Xavier for their a g g rav atin g roles in the offenses, pursuant to section 3B1.1(c). After 3-level r e d u c tio n s for acceptance of responsibility, the total offense level for both d efen d an ts was 27. With a criminal history category of I for each defendant, both co m p u tatio n s resulted in a recommended sentencing range of 70 to 87 months.
T h e Lozanos objected to the PSR's recommendation of the 20-level e n h a n c e m e n t. Instead, they argued that the correct computations should have reflected the value of the counterfeit or infringing 3 items in the market in which th o se goods were sold, which in this case was Latin America, as opposed to the M a n u f actu rer's Suggested Retail Price in the United States, which the PSR reco m m en d ed . Under the Lozanos' calculations, their offense levels would have b een 8.
T h e government, on the other hand, asserted that the retail value 4 of the leg itim ate or infringed item in the United States was the proper valuation method u n d er section 2B5.3. However, it conceded that the total loss amount should be red u ced to $3,700,000, which resulted in an 18-level enhancement, as opposed to th e 20-level enhancement recommended in the PSR. Agreeing with the g o v ern m en t, the district court overruled the Lozanos' objections, finding that the retail value of the infringed items in the United States was the appropriate v alu atio n method because (1) the Lozanos operated a business in the United States, (2 ) they sold a portion of the counterfeit goods in the United States, and (3) the c o u n te rf eit items were seized in the United States. In addition, the court overruled X a v ie r 's objection to the enhancement for his role in the offense. Further, at sen ten cin g the government refused to move for the additional 1-point reduction for a cc ep ta n c e of responsibility; thus, the court only applied a 2-point reduction, rather th a n the 3-point reduction recommended in the PSR. In all, the total offense level d ro p p ed from 27 to 26, which yielded a sentencing range of 63 to 78 months.
After considering the Guidelines range and the factors set forth in 18U.S.C.
§ 3553(a), the court sentenced both Herman and Xavier to 72 months. In sen ten cin g Herman Lozano, the court stated: L e t me just say that also that while I believe that I can sentence w ith in the applicable guideline range and the sentencing guidelines, as th ey have been considered and calculated, but being aware that the calcu latio n may be subject to challenge, I will want the record also to reflect that I have considered, as I have [said], the factors in 3553, and th e sentence that I would impose outside the guidelines in the event th e calculation would be successfully challenged.
S o , what I am saying is if, for some reason, the calculation is su ccessfu lly challenged, that I would otherwise sentence outside the g u id e lin e s to the same sentence that I am going to announce today as b e in g a guideline sentence.
In sentencing Xavier Lozano, the court made a similar comment: W ith respect to Xavier Lozano, again let me just say that I have c o n s id ered both the sentence within the guidelines as advisory, as well a s the reasonable sentence under 3553 and believe that I can sentence w ith in the guidelines; however, [I am] aware that the guideline sen ten ce may be subject to challenge based on the calculation of the v a lu e .
I want the record to reflect that in the event that [] challenge w a s successful, that I would otherwise sentence outside the guidelines p u rsu an t to the provision of 3553, believing that a seventy-two month sen ten ce would be a reasonable sentence considering each of those f a c to r s .
II. DISCUSSION W e review the district court's factual findings for clear error and the ap p licatio n of the Sentencing Guidelines de novo. See United States v. Crawford, 4 0
7 F.3d 1174, 1177-78 (11th Cir. 2005). In evaluating the reasonableness of a s en te n c e, we apply a deferential standard in determining whether the sentence im p o sed serves the purposes of 18U.S.C. § 3553(a). See United States v. Talley, 4 3
1 F.3d 784, 788 (11th Cir. 2005).
On appeal, the Lozanos argue that the district court's use of the MSRP c re ate d a grossly inflated infringement amount, far beyond the profits they realized o r the pecuniary loss they caused the trademark holders to suffer. Instead, they co n ten d the court should have used the sale price of the counterfeit items in the m ark et in which they were sold-- Latin America-- because the retail value of the trad em a r k e d items in the United States market over-represents their culpability.
T h e Lozanos argue that the MSRPs reflect prices above those normally charged for s u c h items. In support of this, they point out that none of the trademark holders su b m itted a victim impact statement, such that the court had no evidence of p e c u n ia r y loss. They further maintain that the prices of the goods in the Latin A m erican market should have been considered, as they intended the products to be s o ld in that market and the products were much cheaper there. In all, they assert th at the court's infringement computation resulted in a fictional loss amount far b eyo n d that actually caused by their fraud. In addition, Xavier asserts that the s ec tio n 3B1.1 enhancement he received for his role in the offense was improper, as h e had no authority or control either in the company or over other employees.
F in ally, the Lozanos contend that their sentences were unreasonable. We address each of these issues in turn.
A. A p p lica tio n Of The Guidelines.
I n reviewing a sentence, the court must first determine whether the district c o u r t correctly calculated the Guidelines range. The parties disagree about whether th e district court properly applied section 2B5.3, which provides that the in f r in g em en t amount is the retail value of the infringing item, except in the f o llo w in g enumerated situations that necessitate use of the infringed item's value: ( i) The infringing item (I) is, or appears to a reasonably informed p u r ch a s e r to be, identical or substantially equivalent to the infringed ite m ; . . . or (v) The retail value of the infringed item provides a more accu rate assessment of the pecuniary harm to the copyright or trad em ark owner than does the retail value of the infringing item.
U.S.S.G. § 2B5.3 at comment. n.2(A). The court is directed to use the retail value o f the infringing item in any case not covered by the aforementioned provisions.
I d . at comment. n.2(B).
In the case at bar, the language providing that the infringing item "is, or a p p e a rs to a reasonably informed purchaser to be, identical or substantially eq u iv alen t to the infringed item" is critical. The district court found that the in frin g in g and infringed items were essentially indistinguishable and thus co n clu d ed that use of the retail value of the infringed item was appropriate. We rev iew this factual finding for clear error, a highly deferential standard.
At the sentencing hearing, Agent Llorca of the United States Bureau of I m m ig r a tio n and Customs Enforcement testified that it would have required an ex p ert to recognize that the infringing items were, in fact, counterfeit.
A d d itio n a lly , a representative from the cell phone company, Nokia, testified that th e counterfeit items being sold by Suplimet appeared to an untrained eye to be g e n u in e Nokia products. Indeed, she testified that in order to determine the au th en ticity of many of the items, she had to physically open up the products to v iew the wiring or construction. Furthermore, a defense witness conceded on c ro s s -e x a m in a t io n that the counterfeit items at issue appeared substantially similar to the genuine, trademarked items: Q : So, if a Nokia sticker was placed [on] it, it would look just like a N o k ia battery? A : Yes.
Q : We are referring to batteries, chargers, carrying cases, any kind of accesso ry? A : They would appear to be similar.
Q : How can you tell the difference, you personally? How do you tell th e difference between original Nokia goods and counterfeit Nokia g o o d s or any other trademark? A : I am unable to distinguish them.
In light of such probative testimony, we cannot say that the district court's findings w ere clearly erroneous. To the contrary, we hold that use of the retail value of the in frin g ed item, as opposed to the infringing item, was appropriate and supported by th e Guidelines.
N o n eth eless, the Lozanos contend that use of the infringed item's retail v alu e over-represents their culpability and ignores the "nature and magnitude of th e pecuniary harm." U.S.S.G. § 2B5.3, at comment. backg'd. The Lozanos assert th at because the majority of their sales occurred in Latin America-- a market in w h ic h the trademark holders did not operate-- the trademark holders thus suffered m in im a l pecuniary injury. In support of their argument, the Lozanos u n co n v in cin g ly refer to United States v. Yi,
460 F.3d 623 (5th Cir. 2006).
In Yi, the Fifth Circuit Court of Appeals reversed the district court's use of th e retail value of the infringed items because "[t]he lack of record evidence on p ecu n iary harm to the victim companies weighs against the district court's decision to use the infringed item value." Yi, 460 F.3d at 637. In doing so, it clearly d is ag r e ed with the district court's contention that the retail value of the infringed item s provided "a more accurate assessment of the pecuniary harm to the tr ad e m a rk owners." Id. Crucial to the Fifth Circuit's reversal of the lower court w a s the fact that the infringing and infringed items were distinguishable to a r e a so n ab ly informed purchaser. The same cannot be said in the case at bar.
A cco rd in g ly, Yi cannot be interpreted to mean that the retail value of the infringing ite m should always be considered. Rather, based on the specific facts of that case, th e Fifth Circuit found inapplicable the enumerated provisions regarding retail v alu e of the infringed item and therefore applied the "catch-all" provision, in w h ich the retail value of the infringing item is used. However, on the facts p resen ted here, it would be inappropriate to follow Yi.
The Lozanos next argue that the district court erred in applying the retail v a lu e of the products in the United States, as opposed to Latin America. The p arties do not dispute that the retail value of both trademarked and counterfeit item s in Latin America is drastically less than the retail value in the United States.
H o w e v e r, the Lozanos argue that the court should have used the Latin American m a r k e t because the majority of Suplimet's sales occurred there. The government a ss er ts that because undercover purchases were made in Miami, the district court co rrectly used the retail market for the United States. Under section 2B5.3, retail v a lu e is defined as the retail price of an item in the market in which it is sold. See U .S .S .G . § 2B5.3 at comment. n.2(C). Here, it is undisputed that the Lozanos sold co u n terfeit items in Miami. Though they may have shipped the majority of their p ro d u cts to Latin America for sale, that does not render the district court's decision to use the United States market clearly erroneous. To the contrary, use of the p ro d u cts' retail value in the United States was supported by the evidence and ap p ro p riate under our reading of the Guidelines.
N ex t, Xavier argues the court erred by adjusting his offense level upward 2 le v e ls for his role in the offense, pursuant to section 3B1.1. Reviewing for clear e rr o r , we find sufficient evidence to support the enhancement. Section 3B1.1(c) p r o v id e s that "[i]f the defendant was an organizer, leader, manager, or supervisor in any criminal activity," increase by two levels. The enhancement is also ap p ro p riate "in the case of a defendant who did not organize, lead, manage, or su p erv ise another participant, but who nevertheless exercised management resp o n sib ility over the property, assets, or activities of a criminal organization.
U .S .S .G . § 3B1.1 at comment. n.2. "[T]he assertion of control or influence over o n ly one individual is enough to support a § 3B1.1(c) enhancement." United S ta te s v. Jiminez,
224 F.3d 1243, 1251 (11th Cir. 2000).
H e re , Xavier negotiated the sale of counterfeit products to the undercover a g e n ts . Further, he instructed another employee at Suplimet to engage in co u n terfeit sales. He was in charge of Suplimet, its sales, and its warehouse in H erm an 's absence. Although he did not have any decision-making authority and d id not facilitate the purchase of counterfeit goods from China, Xavier was in tricately involved in the offense. Accordingly, the court did not clearly err in ap p lyin g the 2-level enhancement.
I n sum, we find the district court correctly applied the Guidelines and affirm its decision accordingly.
B . Reasonableness Of The Sentences.
Even were we to find that the district court erred in its application of the G u id e lin e s , we would affirm the sentences imposed, for we find they are r e a so n ab le. The district court made clear that its resolution of the section 2B5.3 issu e did not affect the ultimate sentences it gave the Lozanos after considering all o f the section 3553(a) factors. As we explained in United States v. Keene, 470 F .3 d 1347 (11th Cir. 2006), we can avoid remanding a sentence based on a m isap p licatio n of a complicated Guidelines provision "if district courts faced with d isp u ted guidelines issues state that the guidelines advice that results from decision o f those issues does not matter to the sentence imposed after the § 3553(a) factors are considered." Id. at 1349. This is so because "`it is not necessary to decide g u id elin es issues or remand cases for new sentence proceedings where the g u id elin es error, if any, did not affect the sentence.'" Id. (quoting United States v. W illia m s ,
431 F.3d 767, 775 (11th Cir. 2005) (Carnes, J., concurring)).
H ere, the district court told us that if the Lozanos were correct about using th e Latin American prices to value the counterfeit phone parts, the court still would h av e imposed the same 72-month sentences based on its consideration of the sectio n 3553(a) factors. As we said in Keene, "[t]hat is all we need to know, ex cep t for one thing." Keene, 470 F.3d at 1349.
T h e one other thing we need to know is whether the court's sentences were reaso n ab le. See id. "In determining whether [they were] reasonable, we must a ss u m e that there was a guidelines error-- that the guidelines should have been d e c id e d in the way the defendant[s] argued and the advisory range[s] reduced acco rd in g ly-- and then ask whether the final sentence resulting from consideration o f the § 3553(a) factors would still be reasonable." Id.
If the district court had decided the section 2B5.3 enhancement issue in the L o zan o s' favor, their advisory guidelines range would have been 21 to 27 months, in s te ad of 63 to 78 months. See U.S.S.G. § 2B1.1(b)(1)(E) (the Latin American r eta il price of the counterfeit parts was $117,000, which yields an 8-level e n h a n c e m e n t to the base offense level of 8 for the value of the counterfeit goods); id . ch. 5, pt. A (total offense level of sixteen with criminal history category of I yield s an advisory guideline range of 21 to 27 months' imprisonment). The q u e stio n then is whether the 72-month sentences the court imposed were reaso n ab le, "assuming exactly the same conduct and other factors in the case," but an advisory Guidelines range of 21 to 27 months. Keene, 470 F.3d at 1350.
"O u r post-Booker reasonableness review takes into account the § 3553(a) facto rs as well as the advisory guidelines range." Id. (citing United States v. B o o k er,
543 U.S. 220 , 261, 125 S. Ct. 738, 76566 (2005)). Our review is "d e f er en tia l" to the district court, and it is the defendants' burden to establish that th e ir sentences are unreasonable in light of the record and the section 3553(a) f ac to r s . United States v. Valnor,
451 F.3d 744, 750 (11th Cir. 2006).
T h e district court may determine on a case-by-case basis the relative weight to give the Guidelines range in light of the other section 3553(a) factors. See U n ited States v. Hunt,
459 F.3d 1180, 1184 (11th Cir. 2006). "In some cases it m a y be appropriate to defer to the Guidelines; in others, not. So long as the district c o u r t considers the Guidelines, we do not believe it is appropriate to dictate a `stren g th ' of consideration applicable to every case." Id. at 118485.
I n the instant case, the district court explained that the 72-month sentences w e re appropriate to "fully reflect[] the seriousness of the offense and . . . afford[] ju s t punishment and deterrents." We cannot say that this decision was u n reas o n ab le. The Lozanos' counterfeiting operation was as extensive in time as it w a s costly to the manufacturers. It lasted five years. Before other law en fo rcem en t agencies finally discovered the Lozanos' illegal activities, customs o fficia ls had seized ten shipments of counterfeit cell phone parts headed to S u p lim et and the Lozanos between 1999 and 2002. Despite the seizure of fortyo n e boxes of counterfeit cell phone parts and accessories in January of 2003, the L o z a n o s continued to receive shipments of counterfeit material even though they k n e w that they were under investigation. Following the January seizure, law en fo rcem en t officials seized six more shipments of counterfeit goods to Suplimet, w h ich included tens of thousands of parts and accessories.
T h e counterfeiting operation was expansive, expensive, and extensive. The L o z a n o s, located in Miami, had contacts in China who manufactured and shipped to them the counterfeit phone parts. They then had their father in Colombia sell the c o u n te rf eite d material to retailers in Latin America. It was an international u n d e r ta k in g .
G iv e n the length, breadth, and depth of the Lozanos counterfeiting scheme, th e 72-month prison sentences are not unreasonable. It follows that if there was an y error in calculating the retail value of the goods under section 2B5.3, that error d id not affect the sentences that were imposed. It was harmless. No purpose w o u ld be served by a remand. See Keene, 470 F.3d at 1350.
A F F IR M E D . C A R N E S , Circuit Judge, concurring: I concur in all of the Court's opinion except for the first six paragraphs of P a r t II. A. In those paragraphs the Court holds that the district court did not err in its application of U.S.S.G. § 2B5.3(b)(1) by calculating the infringement amount u sin g the retail value in the United States of the infringed item, instead of using the r e ta il value in Latin America of the infringing item. I see no need to decide this issu e in order to dispose of the appeal.
T h e district court explicitly stated that even if it had decided the infringing am o u n t issue the other way, which would have resulted in a lower offense level, it w o u ld have imposed the same sentence after considering the 18U.S.C. § 3553(a) f ac to r s . And, as the Court concludes in Part II B. of our opinion, the final sentence is reasonable. That means, under United States v. Keene,
470 F.3d 1347 (11th C ir. 2006), we can affirm regardless of whether the district court was correct in its in terp retatio n and application of § 2B5.3(b)(1). On that basis I concur in the a f f ir m a n c e .
The shipment listed Suplimet as the consignee.
2 U.S.S.G. § 2B5.3(b)(1)(B) provides that if the infringement amount "exceeded $5,000, increase by the number of levels from the table in § 2B1.1 . . . ."
3 "Infringing items" are distinguishable from "infringed items." Infringed items are the legitimate items that are infringed upon by the infringing item. See U.S.S.G. § 2B5.3 at comment. n.1.
4 Retail value "of an infringed item or an infringing item is the retail price of that item in the market in which it is sold." U.S.S.G. § 2B5.3 at comment. n.2(C).
