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People v. Chappelone

April 13, 2010


(Solano County Super. Ct. Nos. VCR189828 & VCR189829). Hon. Allan P. Carter.

The opinion of the court was delivered by: Richman, J.


At first blush, this appeal presents what appears to be a relatively straight-forward issue: did the trial court properly calculate the amount of restitution owed by husband-and-wife defendants Yvonne and Michael Chappelone for the theft of a large quantity of retail merchandise from Yvonne's employer, Target? Upon closer examination, however, this appeal presents numerous complexities, such as how to value merchandise that was already damaged prior to the theft; whether the merchandise should be valued at its retail or wholesale price; and whether the calculation should be based on the diminution in value of the merchandise since the bulk of it was recovered by Target. The trial court grappled with these and other questions and, following a contested restitution hearing, ordered defendants to pay restitution in the amount of $278,678.

Defendants contend that (1) the court abused its discretion in calculating the amount of restitution owed and (2) the restitution order violated their Sixth Amendment right to a jury trial. We conclude that their first argument has merit, but the second does not. We thus reverse and remand, but not for a jury trial.


1. The Embezzlement

In 2004, Yvonne*fn1 began employment at the Vallejo location of Target, a nationwide retail store that sells a wide range of consumer goods. Initially, she worked at night, restocking shelves and returning items to their proper locations. In April 2006, she was promoted to "reverse logistics," where she was responsible for seeing that damaged items and merchandise withdrawn by manufacturers were returned to the appropriate entity for credit or otherwise disposed of. Yvonne had to remove some items from the sales floor, while others were already in the stockroom. All of the items were then sorted onto pallets in the stockroom pending disposition.

Yvonne and Shawne Camp, an investigator in Target's assets protection department and the primary witness for Target at the restitution hearing, both testified regarding the pallet system. Although the system is not entirely clear from their testimony, this is how they described it:

The merchandise for which Yvonne was responsible was divided into three categories, yellow-tagged, green-tagged, and red-tagged items, with a separate pallet designated for each category. Yellow-tagged items-or "CRCs"-were items that were damaged in transit to Target or returned by customers because they did not work when purchased. The customer was issued a full refund or replacement, and the item, which still had a dollar value, was returned to the stockroom to be placed on the yellow pallet. Those goods were then shipped to a central location and, from there, returned to the vendors, who issued a credit to Target. Examples of items that would be yellow-tagged included televisions, videos, and DVDs.

Camp explained yellow-tagged items this way: "Yellow, that would be what we call CRC, so when a guest or a customer brings something back, such as an iPod to Target and they say `I bought this iPod, it doesn't work,' they are given a refund or given a new iPod. That iPod still has a dollar value to it, so the disposition-a disposition is given automatically by the computer by the employee that's doing the return on that iPod. A disposition would be given to that item of a yellow label, meaning that a yellow label would be placed on that iPod. That then signifies once it gets back to the stock in the back stockroom area, that that iPod is to go on a particular pallet, which is called the CRC pallet. [¶] We then conduct sweeps where a trailer that brought merchandise into Target would be loaded with these pallets that are supposed to go back to CRC, which I believe is in Indianapolis. So that iPod eventually would be loaded back onto a trailer and sent to CRC in Indianapolis, where we would receive full credit back from the vendor." Yellow-tagged items were typically the most valuable of the three pallets.

Green-tagged merchandise was considered salvage, typically consisting of items or sets that were missing components when purchased, as well as clearance items that had been reduced to up to 90 percent off but still did not sell and were thus withdrawn from the sales floor. These items were "donated" to a charity for 30 cents on the dollar of the last retail price. Some green-tagged items, such as vitamins and food, could not be donated for any money, and were simply given away at a total loss to Target.

Camp gave the following example of green-tagged items: "An example of that would be if somebody brought in... [a] toy, if somebody brought in a box of Legos that maybe retails for a hundred dollars, and they said that, you know, it was missing some of the pieces when they got it, that item then can be given a green label meaning salvage. [¶] So once that item is taken from the service desk, it would be brought to the back room, and it would be placed on another pallet beside that CRC pallet that would be considered a salvage pallet. That's stuff that we then donate to like the Goodwill. But when I say `donate,' it's not given free of cost." Instead, as noted, Target received 30 cents on the dollar of the last retail price. Camp further detailed the green-tagged items that Target could not dispose of for any money: "There's specific items that we are not allowed to donate for a profit where we just have to donate them free of cost. That-those items would be things like vitamins and cereals, foods, pretty much any type of food, except for liquor-we cannot donate liquor. But that would be something that we would have to set up a separate donations place, so maybe like a women's-a battered women's shelter or something, and we just give them all these vitamins, and there is no 30 cents on the dollar for that."

The third pallet was for red-tagged items, which included damaged merchandise that could not be sold and no longer had any financial value to Target. These would include things such as diapers, food items, cosmetics, toiletries, toilet paper, household products, small appliances, glassware, flatware, and clothing. As another example, if a camcorder was removed from a box to be used as a display item, the box would be returned to the stockroom where Yvonne would red-tag it. When asked about more expensive items, like an electronic item missing a charger, Yvonne explained, "If something is minus 50 percent and it should go back to CRC, it's going to be overridden and red-tagged." Red-tagged items were the least valuable of the three pallets.

In addition to the yellow-, green-, and red-tagged items, the pallets also occasionally included new merchandise that nighttime employees transferred from the front of the store to the stockroom. Yvonne was responsible for removing the new merchandise from the pallets and returning it to the sales floor.

In addition to seeing that yellow-tagged merchandise was shipped out to CRC for return to vendors, Yvonne's responsibilities also included disposing of green- and red-tagged goods, that is, damaged or otherwise unsellable items that could not be returned to the merchandisers. Target had an arrangement with Goodwill Industries, a non-profit organization that would take all of the unsellable merchandise, paying Target 30 cents on the dollar for the items. At a certain point, however, the Goodwill pickups became unreliable, and when Yvonne reported this problem to her manager, he advised her to find an alternative way to dispose of the merchandise. Yvonne contacted a number of charities, but no one was willing to accept all of the merchandise, instead wanting first to look through the items and pick out just what they would like.

To help Yvonne, Michael spoke with Thomas Clarke, an acquaintance who volunteered with the Rotary Club, a charitable organization that performs community service. Clarke agreed to accept the merchandise on behalf of the Rotary Club and distribute it to various nonprofits. Because the Rotary Club lacked the capacity to transport and store the volume of merchandise that was available for distribution, Michael would pick it up from Target in his trailer and take it home, and Clarke would retrieve it from there and distribute it. According to Yvonne, her manager was present on multiple occasions when Michael picked up the items.

In June 2006, shortly after Yvonne's promotion, Target received a phone tip reporting that Yvonne was stealing merchandise. A surveillance of Yvonne failed to turn up anything out of the ordinary.

In May 2007, Target received a second such tip. The store began another surveillance, this time uncovering a massive theft. An investigator initially observed Michael drive a trailer onto Target property, load it with merchandise, and drive away. The trailer was traced to defendants, so investigators began watching their home in American Canyon, where they were observed loading merchandise into a sports utility vehicle. The investigators did not intercept them, however, and instead followed Yvonne as she drove the vehicle to Oregon.

Once in Oregon, Yvonne first stopped at a residence later determined to belong to her daughter. She then continued on to a second residence, that belonging to her mother, Barbara Beattie. On Beattie's property, there was a main home, a second home, and a barn with an additional storage area attached. A search of the buildings uncovered a small amount of Target merchandise in the main home. In the second home, the upper floor was set up like a showroom, displaying living room and dining room merchandise. Many of the items had Target price tags or were brands carried by Target. Investigators also discovered shelves lined with toiletries, some bearing a clearance label used by Target when it reduced the price of an item.

The barn, in which the investigators found a "garage sale" sign, appeared to have been converted into a store full of Target merchandise. There was clothing displayed on hangers and merchandise laid out on long tables. Looking through the items, the investigators determined that much of the merchandise came from Target, since some of the brands were specific to Target and some of the items bore a label or logo indicating it was from a Target store.

Adjacent to the barn was a storage area that contained "totes and totes of merchandise." In front of the barn was an area covered with tarps, under which there was more Target merchandise. Next to the barn was a tent-like area that contained larger Target items, like lawn furniture.

It was subsequently learned that Beattie began receiving merchandise from Yvonne in December 2006 and received it through May 2007, when the theft was discovered. During that time, she held three or four garage sales to dispose of merchandise, earning $3,000 in her estimate. Of that, she gave Yvonne approximately $1,500.

Investigators also searched defendants' home in American Canyon. There, they discovered Target merchandise in the house, in the garage, and in a camper on the property. They also recovered Target merchandise, including lawn furniture and bicycles, from a storage unit in Vallejo. At Yvonne's daughter's Oregon residence, they discovered Target merchandise in the house, garage, and an attached storage area.

Defendants were arrested and the merchandise seized. The items recovered in California were transferred to a rented storage unit near defendants' home. The Oregon merchandise was loaded into semi-trucks and transported to a Target distribution center in Oregon, where it was held until it could be inventoried. Eventually, per FBI instructions to retain the merchandise, it was consolidated at a Target distribution center outside of Sacramento and stored in rental trailers pending resolution of the case.

2. The Criminal Proceedings

By amended felony complaint filed May 18, 2007, the Solano County District Attorney charged defendants with one count of conspiracy to commit grand theft, burglary, and receiving stolen property (count 1; Pen. Code, § 182*fn2 ); one count of grand theft by embezzlement (count 2; § 487, subd. (a)); and two counts of receiving stolen property (counts 7 and 8; § 496, subd. (a)). Yvonne was additionally charged with four counts of second degree commercial burglary (counts 3 through 6).

On November 15, 2007, Michael pleaded no contest to the conspiracy charge, and Yvonne pleaded guilty to the conspiracy and grand theft charges.*fn3 The remaining charges were dismissed with a Harvey*fn4 waiver.

On April 16, 2008, the court suspended imposition of sentence and placed defendants on five years probation, with Yvonne to serve 365 days and Michael 210 days in county jail under the sheriff's alternative program. Both were ordered to pay a restitution fee of $220, a probation fee of $300, and a court security fee of $20, as well as restitution to Target in an amount to be determined by the court. Following a contested restitution hearing-described in detail below-the court ordered defendants to pay restitution to Target in the amount of $278,678, subject to an offset should Target receive anything of value for the recovered merchandise. Defendants immediately presented a check for $5,000 to demonstrate their good faith intent to make restitution to Target.

The court scheduled a hearing for May 15, 2008 for a progress report, but subsequently took the matter off calendar and ordered the parties to work with the probation department to determine any offset ...

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