Lagos v. United States
201 L. Ed. 2d 1, 138 S. Ct. 1684, 2018 U.S. LEXIS 3209 (2018)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under the Mandatory Victims Restitution Act, 18 U.S.C. § 3663A(b)(4), the reimbursable "other expenses incurred during participation in the investigation or prosecution" are limited to costs related to government investigations and criminal proceedings, not costs incurred from a victim's own private investigation or participation in civil or bankruptcy proceedings.
Facts:
- Sergio Fernando Lagos controlled a company, Dry Van Logistics, and used it to defraud a lender, General Electric Capital Corporation (GE), of tens of millions of dollars.
- The fraudulent scheme involved creating false invoices for services Dry Van Logistics had not performed and using those invoices as collateral to borrow money from GE.
- After the scheme was uncovered, Dry Van Logistics went bankrupt.
- GE conducted its own private investigation into the fraud and participated as a party in the bankruptcy proceedings for Dry Van Logistics.
- In the course of its private investigation and the bankruptcy proceedings, GE spent nearly $5 million on professional fees for attorneys, accountants, and consultants.
- GE later shared the findings of its private investigation with the U.S. Government.
Procedural Posture:
- Sergio Fernando Lagos pleaded guilty to federal wire fraud charges in a U.S. District Court (trial court).
- During sentencing, the District Court ordered Lagos to pay restitution to the victim, GE, including nearly $5 million for fees related to GE's private investigation and participation in bankruptcy proceedings.
- Lagos (as appellant) appealed the restitution order to the U.S. Court of Appeals for the Fifth Circuit.
- The Fifth Circuit affirmed the District Court's order, upholding the restitution award to GE (as appellee).
- The U.S. Supreme Court granted Lagos's petition for a writ of certiorari to resolve a conflict among the circuit courts on this issue.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the phrase 'other expenses incurred during participation in the investigation or prosecution of the offense or attendance at proceedings related to the offense' in the Mandatory Victims Restitution Act, 18 U.S.C. § 3663A(b)(4), require a defendant to reimburse a victim for costs associated with a private investigation and participation in civil bankruptcy proceedings?
Opinions:
Majority - Justice Breyer
No. The words 'investigation' and 'proceedings' in §3663A(b)(4) of the Mandatory Victims Restitution Act are limited to government investigations and criminal proceedings. The court's reasoning is based on textual analysis and practical considerations. First, the word 'investigation' is linked to 'prosecution,' which refers to a government's criminal prosecution, suggesting 'investigation' also refers to a government's criminal investigation. Second, the statute's language describes a victim's 'participation' in an investigation and 'attendance' at proceedings, terms that naturally fit a role in a government-led process rather than conducting one's own investigation or being a party to a civil suit. Third, the statute's specific examples of reimbursable expenses—lost income, child care, and transportation—are typical costs for cooperating with government authorities, not for hiring private investigators and lawyers. Finally, a broader interpretation would create significant administrative burdens for courts, forcing them to determine if multi-million dollar private investigation costs were 'necessary,' a complex task for a system where over 90% of restitution is never collected.
Analysis:
This unanimous decision resolves a circuit split and significantly narrows the scope of mandatory restitution available to victims under the MVRA. It establishes a clear precedent that victims cannot use the criminal sentencing process to recover costs from their own private investigations or related civil litigation. This forces victims to seek recovery for such expenses through separate, and often less successful, civil lawsuits. The ruling emphasizes a textualist approach to statutory interpretation, using the canon of 'noscitur a sociis' (a word is known by the company it keeps) to interpret the statute's scope based on the context provided by surrounding words and examples.
Unlock the full brief for Lagos v. United States