SCOTUS grants cert in Luis, an important asset forfeiture case

The U.S. Supreme Court has agreed to review Luis v. United States. In Luis, the court will be asked to decide whether the pre-conviction, post-indictment restraint of forfeitable substitute assets, needed to retain counsel of choice in a criminal case, violates the Fifth or Sixth Amendments. 

Americans for Forfeiture Reform will seek permission to file an amicus curiae brief in Luis.

I'll also be blogging about the case, as merits stage briefs begin appearing.

For today, I thought I'd tee up how the case got to the Supreme Court:

Ms. Sila Luis operated a health care business, providing nursing and therapy services. The government obtained a grand jury indictment of Luis, alleging that a portion of her business involved defrauding Medicare by illegally paying kickbacks for patient referrals and billing Medicare for unnecessary services. (Perhaps unsurprisingly, Ms. Luis disputes that her conduct was illegal.)

Concurrent to the indictment, the government filed a civil complaint and an emergency ex parte motion for a temporary restraining order (TRO) and preliminary injunction, seeking to freeze up to $45 million of Luis' assets “to preserve the status quo and ensure that sufficient assets are available to satisfy any judgment requiring restitution or forfeiture.” The $45 million dollar calculation--a sum vastly exceeding Luis' assets--appears to be derived from the gross revenue of her Medicare business (not simply the proceeds of her Medicare business or the proceeds of her alleged frauds or even the revenues tied to the alleged frauds).

Without prior notice to Luis, the district court judge granted an ex parte TRO that prohibited Luis from disposing of any assets 

“that are proceeds from [petitioner’s] Federal health care offenses or property of an equivalent value of such proceeds or profits,” including but not limited to forty bank accounts and sixteen parcels of property. App. 8, 12. On the same date, a federal grand jury returned an Indictment against petitioner that tracked the allegations of the civil complaint. The Indictment invoked 18 U.S.C. § 982 and 21 U.S.C. § 853 to seek forfeiture of assets traceable to the crimes charged, as well as substitute assets. However, the government did not seek a restraining order under section 853(e), having already obtained the ex parte TRO in the parallel civil proceeding under section 1345. The government arrested petitioner and served her with a copy of the civil action." Petition for Writ of Certiorari at 9, United States v. Luis (Oct. 7th 2014), No. 13-13719, 564 F. App’x. 493 (11th Cir. 2014).

Ms. Luis responded by filing a motion to modify the restraining order for the purpose of releasing her untainted assets in her criminal defense, arguing that to do otherwise would contravene the Fifth and Sixth Amendments:

"As the government and Judge Huck acknowledged, petitioner’s net worth was far less than $45 million, so the ex parte TRO effectively prohibited her from spending any funds for her defense. App. 12. Petitioner proffered that she owned untainted assets, not traceable to Medicare revenue, and argued that a court order prohibiting her from using her untainted assets for her criminal defense categorically violated the Fifth and Sixth Amendments: Defendant Luis submits that the Fifth and Sixth Amendments, individually and in combination, require that the court exempt from restraint and forfeiture those assets needed for (and ultimately expended on) her legal defense to the charges pending before Judge Cooke. By freezing even a defendant’s untainted assets before trial, the government not only “cripple[s] a defendant’s ability to retain [private] counsel,” but also takes from her the funds she would otherwise invest in her defense for the best and most industrious investigators, experts, paralegals, and law clerks, to at least attempt to match the litigation support available to the United States Attorney’s Office. DE46:13-14 (citations and quotations omitted); see App. 29." Petition for Writ of Certiorari at 9, United States v. Luis (Oct. 7th 2014), No. 13-13719, 564 F. App’x. 493 (11th Cir. 2014).

After hearing the government's objections, the district court judge rejected Luis' motion, concluding (perhaps carelessly--more on that later) that there is "no Sixth Amendment right to use untainted, substitute assets to hire counsel":

"The more difficult question is the one presented here. That is, whether a criminal defendant has a Sixth Amendment right to use untainted, substitute assets to retain counsel of choice. Although the answer to this question is far from  [**28] clear, the Fourth Circuit's opinion in In re Billman, 915 F.2d 916, 921 (4th Cir. 1990) supports the Government's position. In Billman, a defendant was charged with racketeering and a forfeiture count, and the defendant then transferred some of the assets to another person. Id. at 918. The district court found that the assets that were transferred could not be directly linked to the racketeering, and the circuit court determined that it was bound to accept this finding. Id. As such, they were "substitute" assets. Id. at 920. The transferee argued that she had a Sixth Amendment right to use the funds to retain counsel of her choice. Id. at 921-22. The court rejected this argument because the substitute assets were subject to restraint under § 1963. Id. Therefore, the Billman court's view is that there is no Sixth Amendment impediment to the seizure of substitute assets pursuant to the statute because those assets are "contraband," even if they were not the proceeds of criminal activity. Id. at 922; see also United States v. Am. Therapeutic Corp., 797 F. Supp. 2d 1289, 1293-94 (S.D. Fla. 2011) (finding no Sixth Amendment right to use untainted, substitute assets that are restrained under  [**29] § 1345).

This view is common sense. An example by the Fourth Circuit that was related by the Bissel decision is instructive:
Suppose a bank is robbed and $100,000 taken. A defendant is arrested in possession of $100,000 and nothing more. The defendant protests his innocence and claims, without the slightest proof, that the $100,000 was in fact a gift from a friend. Surely no one will contend that the $100,000 must be made available to pay the defendant's lawyer, and not be kept available for return to the bank in the event the defendant is found guilty.
Bissell, 866 F.2d at 1351 (quoting In re Forfeiture Hearing As to Caplin & Drysdale, Chartered, 837 F.2d 637, 645 (4th Cir. 1988),aff'd sub nom., Caplin, 491 U.S. 617, 109 S. Ct. 2646, 109 S. Ct. 2667, 105 L. Ed. 2d 528.

The reason the bank robber is not permitted to use the $100,000 to hire a lawyer is obvious. The money does not belong to him. But suppose the bank robber in the example above spent the $100,000 that he stole. It just so happens, however, that he has another $100,000 that he obtained legitimately. Should his decision to spend the $100,000 he stole mean that he is free to hire counsel with the other $100,000 when Congress has authorized restraint of those substitute assets?  [**30] The reasonable answer is no. The bank has the right to have those substitute, untainted assets kept available for return as well. Therefore, in accord with the Fourth Circuit's view, the most reasonable conclusion is that  there is no Sixth Amendment right to use untainted, substitute assets to hire counsel." [emphasis added] United States v. Luis, 966 F. Supp. 2d 1321 (S.D. Fla. June 21, 2013).

On appeal, a three-judge panel from the U.S. Court of Appeals for the 11th Circuit, in an unpublished opinion, summarily--and without further explanation or analysis--rejected Luis' arguments as "foreclosed by the United States Supreme Court decisions in Kaley v. United States, 134 S. Ct. 1090, 1105 (2014); Caplin & Drysdale Chartered v. United States, 491 U.S. 617, 631 (1989); United States v. Monsanto, 491 U.S. 600, 616, (1989); and United States v. DBB, Inc., 180 F.3d 1277, 1283-84 (11th Cir. 1999). " United States v. Luis, 564 F. App’x. 493 (11th Cir. 2014). (Notably, none of the panel's cited cases squarely addresses whether untainted substitute assets (Luis' argument!) can be restrained when needed to hire counsel of choice.)

As we get closer to oral arguments, I'll discuss why the case matters and I'll brief some conceptual problems that the case presents. 


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  • commented 2016-04-19 10:02:34 -0500
    also I agree with the United States undoubtedly defend their concepts of Netshoes in the Jornal BrasilTuris if they want to see are here
  • commented 2015-06-08 18:10:21 -0500
    The 6th Circuit, in US v Erpenbeck,(2012) rejected that there was any relationship back (in crime) to Substitute Assets. (agreeing with the definition that Substitute Assets have no relationship to the crime of conviction) There was also a district court case decided prior to that in the ED of KY that lis pendens could not be placed on substitute properties prior to conviction (however, because of a twist in another 6th circuit case, US v Parrett, there was a possible question that some state laws might allow it. (The Gov planned to consult with the Atty General to proceed to the appeals court, but did not follow thru…see US v. Coffman, Dist. Court, ED Kentucky 2010…Erpenbeck validated this opinion).

    853 (p), the part of the statute that allows pursuit of substitute assets generally, would indicate that the Gov should only be pursuing substitute assets after conviction, and only after the proceeds of the crime can not be located. (and the Gov makes a showing that is the case)

    Defendants absolutely should have access to their untainted property before trial in order to defend themselves. It is not as if the Gov is left empty handed should a conviction be achieved. Judgment orders are routinely entered in cases where the proceeds of the crime can not be found, and the Gov can pursue the convicted defendants for pretty much the rest of their lives.

    Another important forfeiture case coming up for oral arguments on June 16 is US v Anderson. In this case, the owner of a condo had a lis pendens placed on her property in 2008. It was alleged that the condo was purchased with the proceeds of crime…and so the condo was named in a civil forfeiture complaint in 2008, and in a criminal forfeiture complaint in 2009. Ms. Anderson could do NOTHING to have her condo freed from the grip of the Government, as the civil case was stayed, and the criminal case did not go to trial until 2011. In May, 2011, some defendants were found guilty. But it was not until many months later (in fact, in 2012) that the court entered the order that would allow Ms. Anderson to even begin to reclaim her condo. After the court allowed extensive discovery (all on the part of the Gov…)….the Ancillary hearing was held in 2013. Ms. Anderson was stuck waiting almost ANOTHER year (until 2014) when the court ruled that the condo was, in fact, hers, and free from the Gov’s claims. It is indisputable that more than five full years passed before the court ruled that Ms. Anderson was a Bona Fide Purchaser for value of the condo. In order to be able to succeed, Ms. Anderson, who had nothing to do with the crimes in question, had to file a claim in the civil case, file a claim in the criminal case, undergo a deposition, have her husband undergo a deposition, then travel from SC to KY to testify on her own behalf. Given the many possibilities of failure that could have cost her the condo (Not filing a claim on time, or in the correct form, failing to properly answer interoggatories, not understanding how a deposition works…or not being counseled before testifying in court) she hired an attorney to represent her thru this labyrinthine area of the law.

    There is a statute that allows successful claimants in civil forfeiture proceedings to file for their attorney fees they incurred in reclaiming their property (Congress thought that such claimants should “be made whole”)…however, the few circuits to address the issue have ruled either that the Ancillary “is not civil or to forfeit property” (the 3rd…Nolasco)….or that since it’s possibly not perfectly clear, Sovereign immunity applies (the 8th….Moser)….therefore, just because it APPEARS that Ms. Anderson was somehow claiming in a “criminal proceeding”…there are arguments to be made that this just is not so…as she was never charged with a crime, the Ancillary has the hallmarks of a civil proceeding, Rule 32.2 states that the Ancillary “is not part of sentencing”….and 983 (i) defines a civil forfeiture….as any provision that allows for forfeiture OTHER THAN A SENTENCE. Further, the 2 courts above have somehow found that the Preliminary Order of Forfeiture “forfeits” property….rather than finding the property merely “forfeitable” (the POF only finds a nexus between the crime and the property…ownership is disregarded, and while IF the defendant has an interest HIS interest IS forfeited…it is possible for assets to appear on a POF in which the defendant has NO interest. To proclaim property forfeited BEFORE a third party has a right to his day in court would appear unconstitutional.)

    Forfeiture law certainly continues to evolve….and anything the makes clear the rights of unconvicted defendants and innocent claimants who somehow find themselves the target of forfeiture should be promoted and upheld.