Ben Hays | Stinson or Kisor: Which Applies when Interpreting Federal Sentencing Guidelines?

Background

Oklean Jacob Ponle orchestrated a massive phishing scheme in 2019, leading to $8.03 million in actual losses and $51.3 million in intended losses to his victims. The scheme consisted of gaining unauthorized access to emails of company executives and using these emails to contact other employees with urgent demands to wire money, ostensibly for corporate needs, which ended up in the defendant’s pockets. Some of the wires were caught and reversed by banks; this is the source of the intended loss amount. After an FBI investigation and arrest, Ponle pleaded guilty to one count of wire fraud in federal court. In determining the range for his sentence, the district court consulted federal sentencing guidelines, which provide a different number of points added to a defendant’s base level depending on the monetary amount of loss.

At issue is whether the court should use actual or intended losses when it calculates loss. The guideline itself does not define ”loss”; however, there is commentary to the guidelines which defines the term as the greater of actual or intended loss. Using the actual loss would add eighteen points to Mr. Ponle’s base level, while using the greater of the actual loss or intended would add twenty-two. The District Court sentenced Mr. Ponle using the actual loss calculation.

A 1993 Supreme Court case Stinson v. U.S. speaks to this issue. There, the Court held that, generally, the commentary is authoritative when determining the meaning of a word or phrase in the guidelines. 508 U.S. 36 (1993). However, in a more recent Kisor v. Wilkie, the Supreme Court clarified two previous cases—Bowles v. Seminole Rock & Sand Co. and Auer v. Robbins—about deference to an agency in interpreting its own regulations and articulated a less deferential standard. 588 U.S. 558 (2019). To summarize, the Court in Stinson analogized the sentencing guidelines to agency regulations and the commentary on the guidelines to an agency’s interpretation of its regulations.  In an appeal to the Seventh Circuit, Ponle argued that the Kisor standard should now apply because that case spoke directly to interpreting agency regulations. Ponle v. United States, 110 F.4th 958, 960–63 (7th Cir. 2024). Additionally, Stinson was decided specifically to fit in the context of Seminole Rock, which has now along with Auer been supplanted by Kisor. Kisor commands courts to use all tools of construction to determine if there is a true ambiguity in a regulation before deferring to an agency’s interpretation. In the instant case, Ponle argued that a court following this standard and using these tools would find “loss” is not ambiguous and has a clear meaning: actual loss. As such, there would be no need to analyze the commentary on the guidelines.

The Split

The Seventh, Fifth, and Tenth Circuits

The Seventh Circuit, along with the Fifth and Tenth Circuits, held in Ponle that Stinson continues to be controlling and was not overruled by Kisor. 110 F.4th 958, 960–63 (7th Cir. 2024). Therefore, the district court was correct in deferring to the sentencing guidelines commentary to calculate the loss amount. Id. The Seventh Circuit provided three main reasons for this decision. First, lower courts are bound to apply Supreme Court precedent, in this case Stinson, and only an extremely clear and unmistaken overruling of that case would alter this obligation. Id. at 962. Second, the Seventh Circuit reasoned that the analogy in Stinson—comparing the sentencing guidelines and commentary to agency regulations and interpretations—was instructional but not precise. Id. Third, the Seventh Circuit pointed out that the concerns raised in Kisor about the absence of public input on agency interpretations do not apply to the sentencing guideline commentary, which includes a public comment process. Id. at 963. Therefore, it is likely that the court viewed these two areas differently, and as such, the precedent in Stinson would still control. Id.

The Third, Sixth, Ninth, and Eleventh Circuits

These four circuits came to the opposite conclusion of the Seventh, Fifth, and Tenth Circuits holding that Kisor is the proper framework.

For example, the Eleventh Circuit held that courts must take a Kisor approach before deferring to the commentary. United States v. Dupree, 57 F.4th 1269 (11th Cir. 2023). In the Eleventh circuit’s opinion, the only way to harmonize Stinson and Kisor is to conclude that “Kisor’s gloss on Auer and Seminole Rock applies to Stinson.” Id. at 1275. Because the analogy to agency regulations in Stinson was so clear and direct, the Court held that any change to interpreting agency regulations must also apply to the sentencing guidelines. Id. at 1274. If one were to treat the sentencing guidelines like agency regulations, they must use all tools of construction before turning to the commentary on the guidelines. See Id.

Looking Forward

Federal sentencing guidelines play a necessary role in our criminal justice system, and properly interpreting and applying them is vital for promoting fairness. In the instant case, there is a need to determine whether loss as used in the guidelines means actual, or the greater of actual or intended loss because this will have a tangible effect on potential prison time for those convicted of fraud-related offenses. However, as evidenced by the deep circuit split discussed, the broader issue of how and when to use the commentary for any number of different sentencing questions must be resolved.

Finally, the Supreme Court’s decision last term to overrule Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. in Loper Bright v. Raimondo must be acknowledged as the elephant in the room. While this decision applies to agency interpretation of statutory text, legal scholars are currently debating its reach and what it means for other deferential standards. Chad Squitieri, Auer after Loper Bright, Yale Journal on Regulation (Oct. 15, 2024),https://www.yalejreg.com/nc/auer-after-loper-bright-by-chad-squitieri/.

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