Fair Market Value Generally Best Measure of Restitution; Uncorroborated Claims of Victim Doesn't Meet Government's Burden

US v. Steele: Steele was convicted of mail theft for stealing GameFly discs out of mail his was transporting (he’d then sell them on the used market). In total, GameFly reported 1290 discs went missing (100 were recovered). The company reported that each was worth $40. In addition, for each disc that went missing, the company incurred a $1 cost to mail a replacement disc to its customer. In total, GameFly claimed restitution of $52,990. Steele objected to the $40-per-disc figure. The Government argued that that was the GameFly’s estimate of replacement cost and presented testimony from a USPS agent about the company’s calculations. The district imposed restitution of $52,990.

On appeal, the Fourth Circuit vacated the restitution order. Noting that the Mandatory Victim Restitution Act does not direct how courts are to determine value for restitution purposes, the court recognized that either fair market value or replacement value could be used. However, in fair market value is more commonly the correct measure, particularly in cases involving fungible property (like GameFly discs). Replacement cost is more appropriate when fair market value “is difficult to determine or would inadequately capture the value of the victim’s actual losses.” Furthermore, courts should proceed cautiously when using replacement costs as a measure because it “may incentivize victims to inflate their losses by replacing older, depreciated property with newer, more expensive property.” Given the fungible nature of the goods in this case, fair market value was the appropriate measure and the district court abused its discretion by using replacement cost. The district court also erred by not holding the Government to its burden of proving loss, which must include something more than the “victim’s unsupported loss estimate.”

Congrats to the Defender office in Western NC on the win!