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State v. Roache

Supreme Court of Iowa

November 16, 2018

STATE OF IOWA, Appellee,

          Appeal from the Iowa District Court for Story County, James B. Malloy, District Associate Judge.

         On review from the Iowa Court of Appeals.

         Defendant seeks further review of court of appeals decision affirming restitution judgment. DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT AFFIRMED IN PART AND REVERSED IN PART.

          John L. Dirks of Dirks Law Firm, Ames, for appellant.

          Thomas J. Miller, Attorney General, Martha E. Trout, Assistant Attorney General, Jessica Reynolds, County Attorney, and Adam Kenworthy, for appellee.

          WATERMAN, Justice.

         In this appeal, we review the level of scrutiny for a criminal restitution award. The operator of a training course for commercial truck drivers imposed a $1900 "fine" on its student for the loss of a paperback study guide, a multiple of the full cost of the course that included the guide. The study guide was in a backpack stolen from the student's parked car. The student has not paid the fine, and his automobile insurer determined the paperback guide had no value. The district court presumed that $1900 far exceeded the actual cost to print the guide but nevertheless ordered the defendant who pled guilty to the theft to pay that amount in victim restitution. The defendant appealed to challenge that amount alone, and we transferred the case to the court of appeals, which affirmed. We assuaged our sticker shock by granting the defendant's application for further review.

         We hold that the scope-of-liability analysis in sections 29 and 33 of the Restatement (Third) of Torts: Liability for Physical and Emotional Harm (Am. Law Inst. 2010) [hereinafter Restatement (Third) of Torts] applies in criminal restitution determinations. For the reasons set forth below, we reverse the $1900 fine-based restitution award as punitive and unsupported by substantial evidence.

         I. Background Facts and Proceedings.

         On October 8 and 14, 2016, police received multiple reports of vehicle break-ins at a parking garage in Ames, Iowa. Officers interviewed victims and reviewed surveillance video from security cameras. One victim reported that her stolen credit card was being used at a local liquor store and bar. Officers went to that vicinity and approached a man recognized from the video. The man, Terran Roache, attempted to flee. Officers apprehended him after a brief pursuit. Roache possessed property stolen from several of the victims and a tire iron.

         The State charged Roache with eleven counts: two counts of criminal mischief in the second degree in violation of Iowa Code sections 716.1, 716.2, and 716.4; six counts of burglary in the third degree in violation of sections 713.1 and 713.6A(2); one count of possession of burglar's tools in violation of section 713.7; one count of unlawful use of a credit card in violation of sections 715A.1, 715A.6(1), and 715A.6(2)(c); and one count of theft in the second degree in violation of sections 714.1 and 714.2(2). In January 2017, Roache, pursuant to a written plea agreement, entered a guilty plea to one count of criminal mischief and one count of burglary. He agreed to pay restitution on all eleven counts. In exchange, the State agreed to dismiss the remaining nine counts. At the plea hearing, after engaging in a colloquy with Roache, the district court accepted his guilty pleas.

         The district court sentenced Roache to an indeterminate prison term not to exceed five years for criminal mischief and two years for burglary, with the sentences to run concurrently and with credit for time served. The court dismissed the remaining counts but ordered Roache to pay restitution on all eleven counts consistent with his plea agreement. The court gave the State thirty days to file a pecuniary damages statement itemizing the amount of restitution each victim was seeking. See Iowa Code § 910.3 (2016).

         The State submitted a pecuniary damages statement seeking a total of $4515.80 in restitution to reimburse Roache's victims for vehicle damage and stolen property. The court approved the amount in full, but gave Roache thirty days to object.

         Roache timely filed a written objection to two items: $1900 to replace Jordan Hagedon's stolen study guide and $958.72 to repair Haoran Wang's windshield. Roache requested a hearing on his objections.

         At the restitution hearing, Hagedon testified he found his Hyundai Santa Fe with a broken window and his backpack missing from the backseat. The study guide, a laptop, a laptop charger, a change of clothes, and prescription eyeglasses were inside the backpack. Neither the backpack nor its contents were recovered. Hagedon submitted a claim to his insurance company. The insurance company determined the study guide had no value, but reimbursed Hagedon for the cost of the remaining items, less his $500 deductible. Hagedon also sought the $500 deductible in restitution, and Roache does not dispute the award of that amount.

         Hagedon was enrolled in a course through Northland CDL Training & Licensing to obtain his commercial driver's license (CDL). As part of the course, Northland issued Hagedon a "Pre-Trip Inspection Study Guide." The study guide was soft-covered, approximately six inches wide by eight or ten inches long, and between a quarter- and half-inch thick. Two weeks before the theft, Hagedon had signed Northland's "check-out agreement" for the study guide, which stated,

I, Jordan Hagedon am a student in the CDL Driver Prep. Course that includes the use of the "Pre-Trip Inspection Study Guide", a published, marked and copyright[ed] booklet, and the sole property of Northland CDL Training, © 2012.
I was made fully aware at the opening class session that I am responsible for returning aforementioned study guide. It was explained fully that if I did not complete ALL portions of the assignments I AM NOT eligible to continue with the CDL Skills testing conducted with a tractor/trailer by the college staff.
By not returning the said study guide on my final testing date, I also fully understand that in addition to a fine for claiming the booklet was lost, I will be listed as incomplete for that assignment and may be deemed as not eligible to be tested for a CDL, thus having any test results become Null and Void. In that event, I fully understand and agree that I may not be issued a CDL regardless of the outcome of the Skills Testing.
The "Pre-Trip Inspection Study Guide" text is copyright protected. Any use in an unauthorized manner, the copyright holders will pursue damages to the full extent of the copyright infringement laws, according to Chapter Five, Article 504 of the U.S. Copyright Act, each infringement carries a minimum $750 and maximum $30, 000 penalty, while willful infringement carries a maximum penalty of $150, 000. This in addition to court orders to pay all legal fees involved.

I understand and agree with these terms and conditions on this date with my pledge to return the Pre-Trip Inspection Study Guide when I come for my final testing day or by mail to the above address if for any reason I do not complete the course.

I am taking Study Guide Number 1895.

         The agreement was silent as to the amount of the fine Northland would charge Hagedon if he failed to return the study guide.

         On October 10, two days after the theft, but before Roache's arrest, Hagedon signed another Northland document that for the first time set the dollar amount of the fine at $1900, and stated,

I was made fully aware at the opening class session that I am responsible for the "Pre-Trip Inspection Study Guide" and by not returning it would result in a FINE (see attached copy of presentation slide, class handout and check-out agreement signed by the student). The "Pre-Trip Inspection Study Guide" book I was issued was Number 01895.
By losing and not returning the said study guide on my final testing date, I also fully understand I will be charged a fine of 4X the course tuition. The calculated charge for this course is $1, 900 (one thousand, nine hundred dollars).[1]

         The attached presentation slide describes the study guide and states, "You MUST Return [the study guide] To Us When You Come For Your Phase 3 Training/Testing. YOU WILL BE CHARGED A FINE IF YOU LOSE IT!!!" The handout attached to the contract is a letter from Randy Grey, Lead Instructor, stating in part, "The Study Guide Is Copyright Protected And Is On LOAN To You. It MUST Be Returned When You Come For Final Testing. Failure to return it will result in a COSTLY FINE." No dollar amount of the fine was mentioned in the handout or slide.

         Hagedon has not paid Northland any amount for the stolen study guide, but has an outstanding $1900 balance with Northland for the full amount of its fine. Hagedon testified that "[Northland has] been waiting for what we would hear from restitution." Hagedon has completed Northland's course and received his CDL.

         On cross-examination, Hagedon agreed that the value of the study guide was not $1900. The court asked Hagedon if he had talked to Northland about waiving the fine because the study guide was stolen. Hagedon replied,

I did. All they said was that they reiterated the fact that people have not returned them in the past, and they do charge the four times the cost of the class. And I did ask that, and they said that if I did get money out of the restitution, they'd like to see that, because it's still a risk to them, I guess, with their copyrighting or their-they wrote that book, they publish that book themselves, and they didn't want that getting out. And any restitution that came out of this, they would still like to get. I haven't spoke[n] with them since probably the day of the class.

         Hagedon testified he did not know what would happen if he failed to pay the fine or if the fine was omitted from the restitution award.

         In a written ruling, the district court ordered Roache to pay $3557.08 in restitution, including $1900 for Hagedon's study guide. In its ruling, the district court found

[t]he "damage" to the victim for failing to return the study guide came to $1, 900. But for the defendant's criminal actions, [Hagedon] would not have been assessed that "fine." The Court would presume that $1, 900 far exceeds the actual cost to print the study guide, but the actual cost of the study guide does not reimburse [Hagedon] for the loss he sustained as a result of the defendant's actions.

         Neither the State nor the victim introduced evidence on Wang's $958.72 claim for his windshield repair, and accordingly, the court disallowed that amount.

         Roache appealed, challenging only the $1900 restitution award for the study guide. We transferred the case to the court of appeals. The court of appeals determined that the $1900 award was supported by substantial evidence and Hagedon's "loss" in that amount was causally related to Roache's criminal activities. The court of appeals affirmed the district court's restitution award in full. We granted Roache's application for further review.

         II. Standard of Review.

         We review the district court's restitution order for correction of errors at law. State v. Iowa Dist. Ct., 889 N.W.2d 467, 470 (Iowa 2017). "In reviewing a restitution order 'we determine whether the court's findings lack substantial evidentiary support, or whether the court has not properly applied the law.'" State v. Hagen, 840 N.W.2d 140, 144 (Iowa 2013) (quoting State v. Bonstetter, 637 N.W.2d 161, 165 (Iowa 2001)). "Evidence is substantial when a reasonable mind would accept it as adequate to reach a conclusion." Bonstetter, 637 N.W.2d at 165 (quoting Hasselman v. Hasselman, 596 N.W.2d 541, 545 (Iowa 1999)).

         III. Analysis.

         We must decide whether the district court erred by including the $1900 fine for the stolen study guide in the restitution order. We begin with an overview of the law governing restitution. We adopt the scope-of-liability analysis in the Restatement (Third) of Torts for criminal restitution cases. We then address Roache's challenges to the $1900 award and conclude the district court erred by awarding that amount without substantial evidentiary support.

         A. Restitution Framework.

         "[T]he purpose of restitution is twofold. It not only serves to protect the public by compensating victims for criminal activities, but it also serves to rehabilitate the defendant." State v. Izzolena, 609 N.W.2d 541, 548 (Iowa 2000). "Unlike other forms of penal sanctions, restitution forces the offender to answer directly for the consequences of his or her actions." Bonstetter, 637 N.W.2d at 165. We thoroughly reviewed the history of criminal restitution in State v. Jenkins, 788 N.W.2d 640, 642-43 (Iowa 2010) (surveying state and federal legislation and caselaw).

         Iowa Code chapter 910 governs criminal restitution. "Restitution is mandatory '[i]n all criminal cases in which there is a plea of guilty, verdict of guilty, or special verdict upon which a judgment of conviction is rendered.'" Hagen, 840 N.W.2d at 149 (alteration in original) (quoting Iowa Code § 910.2(1)). Restitution orders may include payment of pecuniary damages to the victim and payment of criminal fines, penalties, and surcharges to the clerk of court. Iowa Code §§ 910.1(4), .2(1); Hagen, 840 N.W.2d at 149. Section 910.1 limits restitution for the victim's pecuniary damages to those recoverable in a civil action and unreimbursed by insurance:

"Pecuniary damages" means all damages to the extent not paid by an insurer, which a victim could recover against the offender in a civil action arising out of the same facts or event, except punitive damages and damages for pain, suffering, mental anguish, and loss of consortium. Without limitation, "pecuniary damages" includes damages for wrongful death and expenses incurred for psychiatric or psychological services or counseling or ...

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