Appeal from the United States District Court for the District of Arizona G. Murray Snow, District Judge, Presiding D.C. No. 2:09-cv-00246-GMS
The opinion of the court was delivered by: Rakoff, Senior District Judge:
Argued and Submitted January 10, 2012-San Francisco, California
Before: J. Clifford Wallace and Milan D. Smith, Jr., Circuit Judges, and Jed S. Rakoff, Senior District Judge.*fn1
Opinion by Judge Jed S. Rakoff; Dissent by Judge Wallace
The issue in this case is whether, under the Mandatory Victims Restitution Act of 1996 ("MVRA"), a district court impermissibly delegates its obligation to set a restitution payment schedule when it orders "immediate" payment with the expectation that the Bureau of Prisons ("BOP") will work out a payment schedule with the prisoner pursuant to the Inmate Financial Responsibility Program ("IFRP"). We hold that where the sentencing court has failed to consider whether the defendant has the financial resources to pay restitution immediately, ordering immediate payment impermissibly delegates to the BOP the court's obligation to set a payment schedule.
On December 9, 2002, petitioner Jack Richard Ward was sentenced in the Eastern District of California to 300 months' imprisonment and 3 years' supervised release after being convicted of one count of attempted Armed Bank Robbery and nine counts of Armed Bank Robbery. In addition to his prison term, the sentencing court ordered Ward to pay a $1,000 Crime Victim Fund Assessment and $27,885 in restitution to the crime victims. The "Schedule of Payments" portion of the court's judgment stated that the Crime Victim Fund Assessment and restitution were due and payable "immediately." Ward was then sent for incarceration to the Federal Correctional Institution in Phoenix, Arizona, where he was voluntarily employed by Unicor (the prison employment system). See United States v. Ward, No. CR 02-5231 AWI, 2008 WL 5220959, at *1 (E.D. Cal. Dec. 12, 2008). In accordance with standard practice, portions of Ward's Unicor pay was deducted and applied to his restitution obligation.
Ward subsequently filed motions in the California district court that sentenced him, requesting deferral and/or reduction in his restitution payments. The California district court construed this as a motion to vacate, set aside, or correct sentence under 28 U.S.C. § 2255, and amendments to that motion. Id. at *1-2. The court then concluded that its order for "immediate" repayment of restitution impermissibly delegated to the BOP the court's obligation to set a repayment schedule, and ordered the BOP to cease collecting money from Ward for payment of restitution until the court issued a new restitution order. Id. at *2-4. After the Government moved for reconsideration, however, the district court concluded that because neither 28 U.S.C. § 2255 nor 18 U.S.C. § 3664(k) allows a district court to rule on the legality of a restitution order, and because Ward was incarcerated in Arizona, it lacked jurisdiction to issue its prior Order, and accordingly vacated the Order. See United States v. Ward, No. CR 02-5231 AWI, 2009 WL 160690, at *1-2 (E.D. Cal. Jan. 22, 2009) (noting § 3664(k) allows district court to change a restitution schedule based only on changed financial circumstances and citing United States v. Gross, 307 F.3d 1043, 1044 (9th Cir. 2002)).
After the termination of his California district court proceeding, Ward initiated this habeas proceeding pursuant to 28 U.S.C. § 2241 in the District of Arizona, claiming:
The BOP lacks a lawful order of restitution from the district court in accordance with the Mandatory Victims Restitution Act of April 1996, to collect restitution from the Petitioner during his incarceration. The BOP, without a lawful order of restitution, cannot force the Petitioner to participate in the Inmate Financial Responsibility Program and must place Petitioner on "no obligation" status.
The Government argued that Ward's habeas petition should be denied because Ward had not exhausted his administrative remedies and because his claim was meritless. Ward argued that the district court should exercise its discretion to hear his petition because any attempt to exhaust his administrative remedies would be futile.
In a Report and Recommendation, the magistrate judge recommended the district court deny the petition, concluding that Ward had not exhausted his administrative remedies as required by the Prison Litigation Reform Act, 42 U.S.C. § 1997e(a). See Ward v. Chavez, No. 2:09-cv-00246-GMS, Dkt. No. 11 (D. Ariz. May 26, 2009). The district court, after considering Ward's objections to the R&R and the Govern-ment's responses, adopted the R&R in part. Ward v. Chavez, No. CV-09-00246-PHX-GMS, 2009 WL 2753024 (D. Ariz. Aug. 27, 2009). The district court agreed with Ward that the PLRA's exhaustion requirement does not apply to § 2241 habeas petitions, but declined to waive the judicially-created exhaustion requirement on the grounds of futility. Id. at *2-4 ("Petitioner has failed to show sufficient evidence that his exhaustion of the BOP appeals process would have been futile.").
Notwithstanding its refusal to waive the exhaustion requirement, the district court then addressed the merits of Ward's claim and found it meritless for two reasons. First, the court concluded that Ward was not being forced to participate in the IFRP, as it is a voluntary program that Ward chose to participate in and could exit at anytime. Id. at *5. Second, the court concluded that since the sentencing court had not required the BOP to set a schedule of payments, it had not delegated its authority to set a restitution schedule to the BOP. Id. at *6. Because the sentencing court neither directed the BOP to set a schedule nor required Ward to participate in the IFRP, the court concluded that the cases Ward relied on did not apply to his claim. Id. Ward appeals to this Court from this decision.
 Before considering the merits of Ward's petition, we first address the issue of exhaustion. As a prudential matter, courts require that habeas petitioners exhaust all available judicial and administrative remedies before seeking relief under § 2241. Castro-Cortez v. INS, 239 F.3d 1037, 1047 (9th Cir. 2001), abrogated on other grounds, Fernandez-Vargas v. Gonzales, 548 U.S. 30 (2006). This exhaustion requirement is subject to waiver in § 2241 cases because it is not a "jurisdictional prerequisite." Id. Typically, exhaustion can be waived "if pursuing those [administrative] remedies would be futile." Fraley v. U.S. Bureau of Prisons, 1 F.3d 924, 925 (9th Cir. 1993).
Here, Ward exhausted only step one of the three-step BOP administrative remedy system: he filed a formal administrative grievance with the Warden, which the Warden denied. 28 C.F.R. § 542.10 et seq.*fn2 Ward argues, however, that any administrative appeal would have been futile, as the denial was based on an official policy of the BOP: the IFRP. See Sours v. Chavez, No. 2:08-cv-01903-SRB, Dkt. No. 22, slip op. at *2-3 (D. Ariz. June 17, 2009) (report and recommendation) (concluding exhaustion not required where request for relief denied based on official BOP policy), as cited in Sours v. Chavez, No. CV08-1903-PHX-SRB, 2009 U.S. Dist. LEXIS 76965, at *2-3 (D. Ariz. Aug. 26, 2009). Sours, like this case, involved a petitioner seeking to set aside a restitution order that improperly delegated scheduling authority to the BOP. Sours, No. 2:08-cv-01903-SRB, Dkt. No. 22, slip op. at *1-2. In waiving exhaustion, the Sours court relied on our opinion in Fraley, which held there was futility where the petitioner's claim was denied based on official BOP policy. Fraley, 1 F.3d at 925. The petitioner in Sours, unlike Ward, had gone through three out of four levels of BOP review, Sours, No. 2:08-cv-01903-SRB, Dkt. No. 22, slip op. at *3-4. But it was the reliance on the "official policy" that led to a finding of futility in Sours (and Fraley), and the Sours court expressly noted that the level of Sours's exhaustion simply showed his petition was even more futile than Fraley, where the prisoner had gone through only one level of review. Sours, No. 2:08-cv-01903-SRB, Dkt. No. 22, at *3-4.
 Because of the existence of official BOP policy - the IFRP - exhaustion would be futile here, as it was in Sours and Fraley. The district court incorrectly dismissed the probative value of the BOP's return to collecting restitution from Ward after the sentencing court vacated, for lack of jurisdiction, its order that granted Ward relief. Ward, 2009 WL 2753024, at *3-4. The fact that the BOP resolved to continue collecting restitution from Ward after the sentencing court determined its own restitution order was unlawful, before then vacating for lack of jurisdiction after the Government moved for reconsideration, shows a return by the BOP to the official policy of the IFRP. It also shows that any further appeal by Ward would unquestionably have been denied. Accordingly, the district court erred in not waiving the exhaustion requirement, as Ward's exhaustion of his administrative remedies would have been futile.
 Turning to the merits of Ward's petition, the MVRA directs that a sentencing court "shall . . . specify in the restitution order the manner in which, and the schedule according to which, the restitution is to be paid." 18 U.S.C. § 3664(f)(2). We have previously held that the district court's statutory responsibility to set the restitution payment schedule is "non-delegable." United States v. Gunning (Gunning I), 339 F.3d 948, 949 (9th Cir. 2003); United States v. Gunning (Gunning II), 401 F.3d 1145, 1149 (9th Cir. 2005). "[T]he district court simply does not have the authority to delegate its own scheduling duties - not to the probation office, not to the BOP, not to anyone else." Gunning II, 401 F.3d at 1150.
Here, Ward argues the sentencing court impermissibly delegated its authority to the BOP in effect by ordering payment of restitution "immediately" without specifying any payment schedule, leaving him no option but to participate in a BOP prison work program in order to attempt to comply with the sentence in good faith (given his lengthy sentence), thus subjecting him to the IFRP. In Gunning I, the district court ordered restitution payable "immediately," with any amount unpaid after the defendant's release "to be paid during the period of supervision as directed by a U.S. probation officer." 339 F.3d at 950. We held this order assigned to the probation office "full control of subsequent payment," and thus impermissibly delegated the district court's authority to probation. Id. On remand, the district court ordered restitution payable "immediately," and additionally ordered that "(1) during the time of [the defendant's] imprisonment, it was to be paid through the BOP Inmate Financial Responsibility Program (IFRP), and (2) during the period of supervised release it was to be paid in monthly installments of not less than ten percent of Gunning's gross income, commencing thirty days after his release from imprisonment." Gunning II, 401 F.3d at 1147 (summarizing district court's order). We again held that the district court impermissibly delegated its authority, this time to the BOP. Id. at 1150. In so holding, we explained that, "be-cause restitution was due immediately, there was a period between sentencing and supervised release - the period of Gunning's incarceration. That had to be provided for. At that point, the district court overlooked the spirit of our decision and delegated the non-delegable to the BOP for the incarceration period." Id. (emphasis supplied).
In United States v. Lemoine, 546 F.3d 1042 (9th Cir. 2008), we subsequently clarified the demarcation between impermissibly delegating authority to the BOP and the BOP's independent power to administer the IFRP. Lemoine's order of restitution required him to pay restitution during his imprisonment "at the rate of not less than $25 per quarter, and pursuant to the Bureau of Prisons' Inmate Financial Responsibility Program." Id. at 1044 (emphasis supplied). Lemoine voluntarily enrolled in the IFRP, and the BOP required Lemoine to pay restitution at a rate of $132 per month, leading to Lemoine challenging the BOP's authority to require payment higher than the court's schedule. Id. Because the district court set a schedule of at least $25 per quarter, we upheld this restitution order. Id. at 1047-50. Rejecting Lemoine's arguments that he was "forced" to participate in the IFRP because he would be denied certain privileges if he had refused to join, we held "that, where the district court has properly set a restitution repayment schedule as required under the MVRA, the BOP has the authority to encourage voluntary payments in excess of those required under the court's judgment by conditioning the receipt of certain privileges during the term of imprisonment on the inmate's participation in the IFRP." Id. at 1050.
 Since Lemoine forecloses Ward's argument that he is being "forced" to participate in the voluntary IFRP, the issue in this case thus turns on whether by ordering "immediate" payment of restitution, the district court failed in effect to set a restitution repayment schedule and instead delegated its statutory duty to the BOP. Dicta in both Gunning II and Lemoine suggest that "immediate" repayment does not satisfy the MVRA's requirement that the district court "shall . . . specify in the restitution order the manner in which, and the schedule according to which, the restitution is to be paid." 18 U.S.C. § 3664(f)(2). Lemoine noted that "[t]he First, Second, Third, Sixth, Eighth, Tenth, and Eleventh Circuits have all held that a district court must set a restitution repayment schedule, and those that have reached the issue have concluded, as we did in Gunning II, that a court may not simply order immediate payment and leave to the BOP the task of setting the actual schedule." 546 F.3d at 1048 n.4 (citations omitted).*fn3 Indeed, the sentencing court in Ward's case agreed, before it later dismissed Ward's petition for lack of jurisdiction.
The court is informed that, as in the present case, courts of this district have commonly imposed restitution "due immediately" as part of sentences where the defendant is committed to a term of imprisonment. The expectation has been that BOP and/or Probation will work out the details of payment. Pursuant to the foregoing discussion [of Gunning I and II and Lemoine], it is now apparent to the court that the usual form of imposition of restitution in this district constitutes an impermissible delegation of authority to either BOP or Probation.
United States v. Ward, 2008 WL 5220959, at *3.
The Government argues that Gunning II can be distinguished because the district court in that case ordered restitution to be paid according to the IFRP, impermissibly delegating the court's authority, whereas here the court did not explicitly order payment according to the IFRP. 401 F.3d at 1147. But given Lemoine, we cannot fairly limit Gunning II's applicability to cases where the court explicitly orders participation in the IFRP. The order in Lemoine directed resti- tution payment of at least $25/quarter, to be paid "pursuant to" the IFRP, which the district court held "did not mandate" Lemoine's participation in the IFRP. 546 F.3d at 1044. In upholding this order, we relied on the "proper" setting of a restitution payment schedule by the district court (at least $25/quarter) in holding that "the BOP has the authority to encourage voluntary payments in excess of those required under the court's judgment." Id. at 1050. Unless the district court sets a "proper" schedule, the order is not valid, regardless of whether it explicitly mandates participation in the IFRP.
This leads to the question of what a "proper" restitution order entails. The district court in this case held that a restitution order requiring payment "due immediately" is a valid order in compliance with the MVRA. Ward v. Chavez, No. CV-09-00246-PHX-GMS, 2009 WL 2753024, at *6 (D. Ariz. Aug. 27, 2009).*fn4 Likewise, the Government argues that in United States v. Martin, we previously held that a restitution order requiring immediate payment is a valid order. See United States v. Martin, 278 F.3d 988, 1006 (9th Cir. 2002). Martin, however, is inapposite to this case, as we did not there address whether "immediate" payment of restitution delegated scheduling authority to the BOP or probation, but rather concluded that "[t]he court had before it information regarding Defendant's financial resources that it presumably considered and found insufficient to warrant periodic payments." Id. at 1006. In so holding, we found that the information available to the sentencing court was sufficient to discharge the court's responsibilities under the MVRA, including the requirement that the sentencing court consider the defendant's financial position in determining a restitution payment schedule. See id.; 18 U.S.C. § 3664(f)(2).
By contrast, the majority of our sister circuits to have considered the issue have concluded that where the defendant lacks the financial resources to make immediate payment, a sentencing court may not order immediate payment because it implicitly delegates to the BOP or the probation office the district court's obligation to schedule payment. For example, in United States v. Prouty, the Eleventh Circuit concluded that, since setting the payment schedule is a "core judicial function," a restitution schedule ordering "immediate" payment "with an informal understanding that the probation office shall set a repayment schedule" impermissibly delegated the district court's duty. United States v. Prouty, 303 F.3d 1249, 1254-55 (11th Cir. 2002), cited with approval in Lemoine, 546 F.3d at 1048 n.4. The Third Circuit, endorsing Prouty, has also taken the position that the district court may not simply order immediate payment of restitution with the expectation that the BOP or Probation will set the details of payment. See United States v. Corley, 500 F.3d 210, 225-27 (3d Cir. 2007), vacated and remanded on other grounds by 556 U.S. 303 (2009), cited with approval in Lemoine, 546 F.3d at 1048 n.4. The Third Circuit noted that since the "District Court apparently understood that Corley could not make immediate payment in full, it was required under § 3664(f)(2) to set a different schedule of payments. . . . [O]rders directing 'immediate' payment under such circumstances are indistinguishable in principle from outright delegations of authority to the Bureau of Prisons." Id. at 226-27.
The Eighth Circuit also agrees. In United States v. McGlothlin, the district court ordered restitution payable "immediately," but refused to set a payment schedule at sentencing and instead said that he would "let the Bureau of Prisons tackle that problem." United States v. McGlothlin, 249 F.3d 783, 785 (8th Cir. 2001), cited with approval in Lemoine, 546 F.3d at 1048 n.4. The Court of Appeals reversed, holding that the district court could not leave to the BOP its statutory duty to set a payment schedule, and that the district court must set a "detailed payment schedule at sentencing." Id. Likewise, the Second Circuit in United States v. Kinlock rejected a restitution order that simply ordered payment "immediately," holding that "[w]hen restitution cannot be paid immediately, the sentencing court must set a schedule of payments for the terms of incarceration, supervised release, or probation." United States v. Kinlock, 174 F.3d 297, 301 (2d Cir. 1999), cited with approval in Lemoine, 546 F.3d at 1048 n.4.*fn5 Additionally, the First, Sixth, and Tenth Circuits have endorsed this approach, albeit, like Lemoine, in dicta or in factual circumstances not entirely similar to the instant case. See United States v. Merric, 166 F.3d 406, 409 (1st Cir. 1999); United States v. Davis, 306 F.3d 398, 426 (6th Cir. 2002); United States v. Overholt, 307 F.3d 1231, 1256 (10th Cir. 2002), all cited with approval in Lemoine, 546 F.3d at 1048 n.4. But see United States v. Sawyer, 521 F.3d 792, 796 (7th Cir. 2008) (concluding that court ordered payment schedules "need not, and as a rule should not, begin until after the defendant's release from prison," and that "[p]ayments until release should be handled through the ...