State v. Sabbagh , 2019 UT App 179 ( 2019 )

2019 UT App 179THE UTAH COURT OF APPEALS
STATE OF UTAH,
Appellee,
v.
BASHAR SABBAGH,
Appellant.
Opinion
No. 20180681-CA
Filed November 7, 2019
Second District Court, Ogden Department
The Honorable Mark R. DeCaria
No. 171901390
Emily Adams and Cherise M. Bacalski, Attorneys
for Appellant
Christopher F. Allred and Sean D. Brian, Attorneys
for Appellee
JUDGE RYAN M. HARRIS authored this Opinion, in which
JUDGES MICHELE M. CHRISTIANSEN FORSTER and KATE APPLEBY
concurred.
HARRIS, Judge:
¶1 In June 2017, the bookstore at Weber State University (the
Store) was running a screaming deal on sets of wireless
headphones: although the Store had paid a wholesale price of
$299 for the headphones, it marked them for sale for just $175.
But this deal—as good as it was—was not good enough for
Bashar Sabbagh, who elected to walk into the Store and steal
four sets of the headphones. After being caught and prosecuted
for retail theft, Sabbagh pled guilty, and the district court
imposed a sentence that included a requirement that Sabbagh
pay restitution to the Store.
State v. Sabbagh
¶2 At the restitution hearing, the State argued that the proper
restitution amount should be $1,199.76 ($299.94 x 4), because the
Store paid a wholesale cost of $299 for the headphones and
would have to pay that price to obtain replacement items. The
State asserted that the Store had been selling the headphones as
a “loss leader,” hoping that the low price would attract
customers into the Store, who might buy additional merchandise
on that occasion as well as future occasions. Sabbagh, on the
other hand, pointed out that the fair market value of the
headphones should be the price at which they had been offered
for sale, and accordingly argued that the proper restitution
amount should be $700 ($175 x 4). The district court agreed with
the State, and ordered Sabbagh to pay $1,199.76 in restitution.
¶3 Sabbagh now appeals from the district court’s restitution
order, asserting that the court incorrectly calculated the
restitution amount as the wholesale value rather than the (in this
case lesser) retail value. “We will not disturb a [district] court’s
restitution order unless it exceeds that prescribed by law or the
[district] court otherwise abused its discretion.” State v. Ludlow,
2015 UT App 146, ¶ 5, 353 P.3d 179 (quotation simplified). “To
the extent that the district court made legal determinations in
connection with its restitution analysis, we review those legal
determinations for correctness.” State v. Jamieson, 2017 UT App
236, ¶ 13, 414 P.3d 559, cert. granted, 421 P.3d 439 (Utah 2018).
¶4 When a defendant commits a crime that results in
“pecuniary damages,” a sentencing court “shall order that the
defendant make restitution” to the victims of the crime. See Utah
Code Ann. § 77-38a-302(1) (LexisNexis Supp. 2019). The term
“pecuniary damages” is defined by statute as “all demonstrable
economic injury . . . arising out of the facts or events constituting
the defendant’s criminal activities and includes the fair market
value of property taken.” Id. § 77-38a-102(6) (2017). Generally
speaking, “fair market value is measured by what the owner of
the property could expect to receive, and the amount a willing
20180681-CA 2 2019 UT App 179State v. Sabbagh
buyer would pay to the true owner for the stolen item.” Ludlow,
2015 UT App 146, ¶ 6 (quotation simplified). “Nevertheless, the
measure of damages is flexible, allowing [district] courts to
fashion an equitable award to the victim.” Id. (quotation
simplified). In calculating restitution, a court should “consider
all relevant facts,” including “the cost of the damage or loss,”
and “the income lost by the victim as a result of the offense.” See
Utah Code Ann. § 77-38a-302(5)(b)(i), (iv).
¶5 Almost always, a retailer offers an item for sale at a price
higher than the wholesale price the retailer paid to obtain the
item. We have already held that, in retail theft cases arising out
of this typical scenario, the proper measure of a victim’s lost
pecuniary damages is the wholesale replacement cost of the
stolen item. See State v. Irwin, 2016 UT App 144, ¶ 7, 379 P.3d 68(“Purchase price—or replacement cost—is a better measure of a
victim’s loss than retail value where, as here, the victim had the
ability to replace the stolen items for much less than their retail
value.”). We reasoned that awarding a retail store its full lost
profits would be improper, both because the store would usually
be able to recover those profits by re-selling a replacement item,
and because lost profits are often uncertain. Id. ¶ 8 (“Damages
for the profits that the retail dealer would normally anticipate
from a sale are not ordinarily allowed unless the retailer can
demonstrate certainty regarding lost profits, such as by
demonstrating that he was unable to obtain substitutes to satisfy
his customers.” (quotation simplified)). We were also wary of
the possibility that restitution would be improperly used “to
grant a windfall to the victim.” Id. ¶ 9.
¶6 In this case, we are presented with a different situation
than was presented in Irwin. Here, the retail price at which the
item was offered was substantially lower than the wholesale
price at which the Store acquired the item. Despite the different
factual predicate, the State urges us to follow Irwin and conclude
that, in this situation as well as the typical one, wholesale
20180681-CA 3 2019 UT App 179State v. Sabbagh
replacement cost rather than the retail sale price should
represent the appropriate restitution amount. Sabbagh, on the
other hand, argues that this situation is materially different from
the typical situation, and that in this case the Store’s pecuniary
damage should be measured by the price at which the Store was
actually offering the headphones for sale on the day of the theft.
We find Sabbagh’s position more persuasive, and we disagree
with the State’s position that Irwin is controlling here.
¶7 As noted above, “fair market value” is equal to the
amount that “the owner of the property could expect to receive,
and the amount a willing buyer would pay to the true owner for
the stolen item.” Ludlow, 2015 UT App 146, ¶ 6 (quotation
simplified). Sabbagh’s argument is simple: the Store had marked
and offered the headphones for sale on the date of theft for $175,
signaling that it was willing to accept that amount from any
willing buyer. No rational buyer, in a retail context, would offer
to pay more than the offered price, and therefore Sabbagh
contends that the marked retail price of the item constitutes a
ceiling (although not necessarily a floor, see Irwin, 2016 UT App
144, ¶ 8) on the retailer’s pecuniary damages.
¶8 The State’s counterargument is not quite as simple.
Emphasizing the “loss leader” concept, the State argues that
Sabbagh’s theft deprived the Store of the opportunity to
“attract[] a paying customer” by offering the headphones for sale
at a low price, and that the Store therefore “los[t] the value of its
investment in the ‘loss leader’ sale.” We do not doubt that the
“loss leader” strategy sometimes pays dividends for retailers.
But the State offers no actual evidence of what kind of payoff the
Store could have expected from its marketing plan, and offers no
evidence tying the proffered $299-per-item price to any
established or expected “loss leader” investment yield. Indeed,
at least on this record, it appears to us that any benefit that the
Store eventually may have realized from its “loss leader”
investment is entirely speculative and unquantifiable. And we
20180681-CA 4 2019 UT App 179State v. Sabbagh
noted in Irwin our reluctance to peg restitution amounts to
speculative components of damage. See Irwin, 2016 UT App 144,
¶ 8 (declining to include “lost profits” in restitution awards,
“unless the retailer can demonstrate certainty”). We therefore
decline the State’s invitation to engage in the exercise of
attempting to quantify the loss that the Store may have incurred
due to the loss of potential additional customers being enticed
into the Store because of the unusually-low marked price of the
headphones. Instead, we focus our analysis on compensating
actual loss.
¶9 And the Store’s actual loss was $175 for each set of
headphones. If Sabbagh had not stolen the headphones, they
would have remained on sale for $175, and there is no evidence
indicating that the Store would have refused an offer from an
actual buyer for that amount. To that extent, the Store’s damages
are quantifiable and certain. While actual buyers may have
purchased additional merchandise along with the headphones,
and may have even turned into repeat customers, we have no
way of knowing, on this record, how many additional visits such
customers would have made, or how much additional
merchandise they would have purchased. We certainly have no
way of knowing whether any such additional purchases would
have been equivalent to $124.94 per set of headphones, which is
the additional amount the State is claiming.
¶10 “To the extent possible, the fundamental purpose of
compensatory damages is to place the plaintiff in the same
position he would have occupied had the tort not been
committed.” Mahana v. Onyx Acceptance Corp., 2004 UT 59, ¶ 26,
96 P.3d 893; 1 see also United States v. Ritchie, 858 F.3d 201, 215 (4th
1. As we noted in State v. Ludlow, “[c]ases addressing damages in
the [civil] context” are “relevant to our analysis because
pecuniary damages in the restitution context are those damages
(continued…)
20180681-CA 5 2019 UT App 179State v. Sabbagh
Cir. 2017) (“[T]he defendant is expected from the outset to repay
all of the actual losses that he caused, but no more.”). “The State
bears the burden of establishing restitution,” State v. Oliver, 2018
UT App 101, ¶ 22, 427 P.3d 495, and without additional evidence
demonstrating a higher degree of “certainty regarding lost
profits,” see Irwin, 2016 UT App 144, ¶ 8, we are unable to
conclude that the State has borne its burden of demonstrating
that the proper measure of the Store’s pecuniary damages is
anything higher than $175 per unit.
¶11 In most retail theft cases—those in which the retail price is
higher than the wholesale price, and the retailer offers no
evidence of certainty regarding lost profits—the appropriate
measure of a victim’s pecuniary damages will be the “wholesale
value or replacement cost” of the stolen item. See id. ¶¶ 8–9. But
in those unusual situations, like this one, in which the retailer
offers the item for sale at a price lower than wholesale price, the
appropriate measure of a victim’s pecuniary damages—again,
absent more certain proof regarding lost profits—will be the
price at which the item is offered for sale on the date of the theft.
¶12 Accordingly, the district court incorrectly calculated the
restitution amount in this case. We therefore vacate the court’s
restitution order, and remand this case for further proceedings
consistent with this opinion.
(…continued)
‘which a person could recover in a civil action arising out of the
facts or events constituting the defendant’s criminal activities.’”
2015 UT App 146, ¶ 6 n.3, 353 P.3d 179 (quoting Utah Code Ann.
§ 77-38a-102(6)).
20180681-CA 6 2019 UT App 179