Thursday, September 19th, 2019

Second Circuit vacates and remands for fact-finding on claim the government breached a plea agreement by its oral representations during plea negotiations, despite the agreement’s “merger clause” (saying the written agreement is “the total agreement” between the parties). United States v. Feldman, Nos. 17-2868-cr, 17-2869-cr,  __F.3d__, 2019 WL 4419378  (Sept. 17,  2019). 

In United States v. Feldman, an opinion authored by Judge Pierre Leval, the Circuit addresses the government’s obligations under a plea agreement based on oral representations “made by the government to the defendant in the course of plea negotiations[.]” 2019 WL 4419378 at *1.

The defendant in this case wasn’t seeking vacatur of his guilty plea. He sought rather to vacate and stay a writ of execution that the government obtained to seize his retirement account and use for restitution. But the government had made representations during plea negotiations indicating the retirement account would be safe. The district court denied the defendant’s motion to vacate and stay the writ of execution on the account. The Circuit, however, vacated the district court’s order denying the defendant’s motion, and remanded for “factfinding and reconsideration of Feldman’s motions.” The Opinion provides an important discussion of the government’s obligations concerning plea agreements.


Doron Feldman pleaded guilty, under a plea agreement, to conspiring with a fellow doctor to defraud Rochester University.

During the plea negotiations, the Assistant United States Attorney (“AUSA”) in charge of the criminal prosecution, promised to recommend to “decision-makers in the Department of Justice (‘DOJ’)” that, “through a practice known as ‘restoration,’ the proceeds of Feldman’s forfeiture would be paid [as restitution] to the victims … and would thus reduce the amount of the restitution obligation imposed on him.” 2019 WL 4419378 at *1. The AUSA was aware of Feldman’s retirement account and its $1,131,000 balance — which wasn’t part of the forfeiture.. Id. And although making clear that DOJ could reject any recommendation, the AUSA “nonetheless expressed optimism that it would accept the recommendation.” Id.

The government’s written plea agreement, however, simply said, “the government may, in its discretion, recommend to the Attorney General” that forfeited money be applied to the restitution obligation. Id. at *2. “The [plea] agreement did not state that the U.S. Attorney would recommend restoration; nor did it mention [the AUSA’s] representation of optimism that the recommendation would be accepted.” Id.

The agreement also contained the usual “merger clause” that says the agreement is “the total agreement” between the parties; there were no promises “other than those contained in this agreement”; and the written agreement “supersedes any other prior agreements[.]” Id.

After the plea and sentence, an AUSA in the same U.S. Attorney’s Office (“USAO”), but from the division that “exercised control over forfeiture matters,” wrote two letters to  the Asset Forfeiture and Money Laundering Section of the Criminal Division at DOJ (“AFMLS”), the final decision-maker on restoration. Id. at *2, *3. The first letter by the AUSA from the forfeiture division (the “forfeiture-AUSA”)  “made the recommendation envisioned in the plea agreement — that Feldman’s forfeited funds be applied to his restitution obligation” and “purported to enumerate the ‘assets owned or controlled’ by Feldman” and didn’t include the retirement account. Id. at *3.

But the forfeiture-AUSA wrote a second letter to AFMLS reporting Feldman’s retirement account. This second letter also indicated that the USAO only recently learned about it. Id. at *3.

AFMLS then denied Feldman restoration. The denial letter showed AFMLS believed that the USAO discovered the retirement account only “after the sentencing of Feldman.” The denial letter also stated that AFMLS’s policy is to deny restoration when victims can obtain restitution from the unforfeited  assets of a defendant. Id. at *4.

The USAO moved for a writ of execution on Feldman’s retirement account, which the district court granted. Feldman moved to vacate and stay that writ because of the government’s representations during plea negotiations. And he sought discovery to support his motion. This appeal followed from the district court’s denial of his motions.

The Circuit’s decision

Feldman’s first argument was that the government “violated its obligations as part of the plea negotiations” when, after the AUSA handling the criminal case “induced him to plead guilty and consent to forfeiture and restitution by undertaking that the Office would recommend restoration,” the forfeiture-AUSA, although initially recommending restoration, “effectively withdrew that recommendation by her [second] letter to AFMLS[.]” Id. at *5.

Second, Feldman argued, the government “made a false or misleading representation when [the AUSA in the criminal case] expressed optimism that the Office’s recommendation of restoration would be accepted by DOJ.” In light of the “DOJ’s governing policy” of denying  restoration when non-forfeited assets are sufficient to pay restitution, “the availability of recourse to Feldman’s [retirement account] effectively foreclosed DOJ’s approval of the restoration request, so that the expression of optimism was without reasonable basis and arguably misleading.” Id. at *5.

The government’s response was “not …to deny the factual assertions on which they are based,” but to argue “rather that Feldman’s arguments are irrelevant” because (i) the promise to recommend restoration was fulfilled by the forfeiture-AUSA’s first letter to AFMLS that recommended restoration, (ii) the recommendation wasn’t expressly withdrawn, and (iii) the “merger clause” of the plea agreement foreclosed any reliance on the prosecutor’s “oral representation of optimism, which is not expressed in the written document.” Id. at *5.

“The district court essentially adopted the government’s arguments as its basis for denying Feldman’s motions” to vacate and stay the writ of execution.  Id. at *6.

The Circuit rejected the government’s arguments. It concluded that the claim that the second letter to AFMLS didn’t rescind the initial restoration request “is overly formalistic.” Id. at *6. “The mere fact that [the second] letter did not characterize itself as ‘rescinding’ the restoration request does not necessarily mean that it did not effectively do exactly that.” Id. And the “second letter was arguably misleading in telling AFMLS that ‘[w]e,[ i.e., the Office] have become aware of additional assets, when, in fact, the Office had been aware of the … account long before [the forfeiture-AUSA] wrote her [first] letter recommending restoration.” Id. (first two sets of brackets in original).

The district court’s rulings for the government, the Circuit reasoned, “might have been compelling with respect to a contract arising out of commercial negotiations among private parties[.]” But different “standards [] govern the interpretation of plea agreements with the government[.]” Id.  at *6.

Such agreements are construed “strictly against the government.” And appellate “review of a plea agreement is not limited to its four corners.” “Government conduct in negotiating plea agreements must comport[ ] with the highest standard of fairness.” Id. (citation omitted).

Thus, the Circuit employs a “relaxed approach to the parol evidence rule in this context,” “even when a plea agreement contains a merger clause.” Id. at *7.  The Circuit explained that “[t]he merger clause is not ironclad and we consider the government’s oral and written statements in our interpretive exercise.” Id.

The Circuit also rejected the government’s excuse that “different attorneys had worked on the prosecution, the forfeiture, and the restitution” and that the forfeiture-AUSA didn’t know about the retirement account. Id. at *4, *7. “The prosecutor’s office is an entity and as such” speaks for the Government.  Id. at *7. “A promise made by one attorney must be attributed . . . to the Government.” Id. (citations and ellipsis omitted).

Finally, the Circuit cautioned the government that, to retract promises made in plea negotiations, simply omitting the representations from the written agreement may not be effective. It explained: “If, prior to the conclusion of the agreement, the government wishes to retract promises and representations earlier made, it is free to do so. However, unlike civil commercial negotiations among private persons, the government may need to make clear to the defendant that prior commitments have been withdrawn.” Id. *7. It “may not be able to rely exclusively on omissions of prior undertakings and representations from the four corners of the written agreement as effective nullification of them.” Id.

Thus, the Circuit vacated “[t]he district court’s orders denying the defendant’s motions to stay and vacate the court’s order of execution” on the retirement account, and it remanded for further proceedings. Id. at *8. (The Circuit doesn’t specify the ultimate relief Feldman should receive if an evidentiary hearing on the plea negotiations bears out his claims. But since restitution to victims is mandatory, the government may be required use the money forfeited to it, by Feldman, as restitution to the victims).

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