by Sam Rutherford

The U.S. Court of Appeals for the Seventh Circuit held that Application Notes to provisions of the U.S. Sentencing Guidelines Manual are still entitled to deference, even after a Supreme Court case questioned the continued applicability of such deference.

Christopher Johnson was indicted for and pleaded guilty to wire fraud and aggravated identity theft after purchasing stolen credit card data and using it to make counterfeit credit cards. At sentencing, the U.S. District Court for the Norther District of Illinois deferred to Application Note 3(F)(i) to U.S.S.G. § 2B1.1, which states the court should assess a minimum loss of $500 per credit card when calculating total loss. Johnson had purchased 4,265 payment card accounts that, when multiplied by $500, results in a total loss of $2,132,500. This total loss in turn triggers a 16-­level enhancement under 2B1.1(b)(1). As enhanced, Johnson’s offense level was 24 with a sentencing range of 51-­63 months.

Johnson, on the other hand, argued that the Application Note is not entitled to deference under the standard articulated by the Supreme Court in Kisor v. Wilkie, 588 U.S. 558 (2019), and that the court should instead determine the relevant enhancement based on actual identifiable losses of $87,570, resulting in only a 6-­level enhancement and much shorter sentencing range. The District Court rejected this argument and sentenced Johnson to 58 months in prison. Johnson timely appealed.

In Stinson v. United States, 508 U.S. 36 (1993), the Supreme Court held that “commentary in the Guidelines Manual that interprets or explains a guideline is authoritative unless it violates the Constitution or a federal statute, or is inconsistent with, or a plainly erroneous reading of, that guideline.” The Stinson Court derived this rule from the deference due an agency’s interpretation of its own regulations under Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945).

In Kisor v. Wilkie, 588 U.S. 558 (2019), however, the Supreme Court modified the rule announced in Bowles by holding that several elements must be met before deference to an agency’s interpretation of its own rules will apply. “First and foremost,” the regulation must be genuinely ambiguous after exhausting the traditional tools of construction. Second, the agency’s interpretation of the regulation must be reasonable; it must “come within the zone of ambiguity the court has identified after employing all its interpretive tools.” And third, the interpretation “must be the agency’s authoritative or official position,” “implicate its substantive expertise,” and “reflect fair and considered judgment.” Kisor (internal quotation marks and citations omitted).

In United States v. White, 97 F.4th 532 (7th Cir. 2024), the Seventh Circuit held that Kisor did not abrogate the deference to Application Notes Stinson requires for two principal reasons. First, unlike agencies within the executive branch, the Sentencing Guidelines Commission is “an independent commission within the judicial branch” with unique characteristics “that affect the deference calculus.” Second, the Supreme Court said nothing in Kisor that suggested it was overruling Stinson, so the Seventh Circuit refused to find it was “overruled by implication.” White.

Johnson did not explain why White was wrongly decided, so the Court applied “Stinson undisturbed by Kisor.” And under existing circuit precedent, an Application Note “is binding authority ‘unless it violates the Constitution or a federal statute, or is inconsistent with, or a plainly erroneous reading of, that guideline.’” United States v. Smith, 989 F.3d 575 (7th Cir. 2021) (quoting Stinson). Johnson did not argue that Application Note 3(F)(i) violates the Constitution and offered no explanation why it is inconsistent with the sentencing Guideline it interprets, the Court noted. In fact, § 2B1.1. does not explain how to calculate loss, and the Seventh Circuit has repeatedly upheld sentences applying the $500-­per-­card minimum required by Note 3(F)(i), according to the Court. See, e.g., United States v. Popovski, 872 F.3d 552 (7th Cir. 2017); United States v. Moore, 788 F.3d 693 (7th Cir. 2015).

The Court also stated that applying the $500-­minimum loss does not conflict with the requirement under 18 U.S.C. § 3553(a) that all sentences must be reasonable. Rather, the District Court must first apply the $500-­per-­card minimum required by Note 3(F)(i) and then determine whether the resulting sentence “overstates the seriousness of the offense” under § 3553(a), the Court instructed. United States v. King, 861 F.3d 692 (7th Cir. 2017). Because this is exactly what the District Court did in Johnson’s case, the Court held that it did not abuse its discretion.

Accordingly, the Court affirmed Johnson’s sentence of 58-­months in prison. See: United States v. Johnson, 104 F.4th 662 (7th Cir. 2024) (per curiam).  

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