Evan T. Barr ()
In December 2016, the U.S. Supreme Court granted certiorari in Honeycutt v. United States to address whether convicted co-conspirators must be held jointly and severally liable for any criminal forfeiture judgment ordered in the case. Federal courts in the past have generally required joint and several liability for all proceeds that were at least “reasonably foreseeable.”
An influential appellate court recently held, however, that a co-conspirator’s forfeiture liability instead should be limited to the amount that he personally obtained from the criminal conduct, setting up the circuit split to be resolved by the high court. The court’s decision in Honeycutt will clarify the parameters of the government’s power to seize and forfeit co-conspirator property in a wide array of federal criminal cases.
Basics of Criminal Forfeiture
Criminal forfeiture in the federal system is a part of sentencing. The forfeiture statutes (including the one at issue in Honeycutt) typically authorize the court to order that the defendant upon conviction forfeit to the United States “any property constituting or derived from, any proceeds the person obtained, directly or indirectly, as the result of such violation.”1 Proceeds are property that otherwise would not exist but for the commission of the underlying offense. Title to such property accordingly passes to the government.
In addition to ordering the forfeiture of certain specific properties associated with the crime, and in confiscating any so-called substitute assets in the event that such directly forfeitable property has been dissipated or is no longer available, the sentencing court may also enter a money judgment against any convicted defendant, reflecting the total amount of illicit proceeds. A money judgment may be imposed notwithstanding whether the defendant has any remaining assets to his or her name at the time of sentencing; this allows the government, in theory, to seize and forfeit assets acquired by the defendant even long after the criminal case is over.
Joint and Several Liability
In the civil context, when two or more parties are “jointly and severally liable” for a tortious act, each party is deemed independently liable for the full extent of the injuries stemming from the tortious activity. The doctrine thereby enables a plaintiff who has obtained a money judgment against more than one party to collect the full amount from any one of the liable defendants.
In multi-defendant federal criminal cases, the general rule has long been that each defendant is jointly and severally liable for the forfeiture of the entire proceeds of the offense. As one commentator has observed, under this rule, “[i]t does not matter whether a given defendant kept the money for himself, passed it on to a third party, or retained only a fraction in comparison to the amounts retained by his confederates. Nor does it matter that the forfeiture is based, in part, on aspects of the offense in which a given defendant did not personally participate.”2
Courts typically have justified this harsh rule because it obviates the need for the government to prove the specific portion of proceeds for which each defendant is responsible; such a requirement, these courts have reasoned, might encourage co-conspirators to mask the allocation of criminal proceeds in order to try to defeat forfeiture altogether. The rule also arguably comports with the well-established principle, first articulated in Pinkerton v. United States, 328 U.S. 640 (1946), that members of a conspiracy are substantively liable for the reasonably foreseeable criminal conduct of the other members in the joint scheme.
The facts in Honeycutt read like an episode of “Breaking Bad.” According to the successful petition for certiorari filed in the Supreme Court and related materials, Terry Honeycutt worked as a salaried employee in charge of sales and inventory at the Brainerd Army Store, a hardware business located in Chattanooga. Terry’s brother, Tony Honeycutt, co-owned the store with their father. The store stocked, among other things, an iodine-based water purification product known as Polar Pure.
In 2008, Terry noticed a number of “edgy looking folks” buying Polar Pure and called the Chattanooga Police Department to inquire as to whether it could be used to manufacture methamphetamine. The police confirmed that it could, and urged him not to sell the product; the Brainerd Army Store continued to sell Polar Pure, however, including to undercover officers. Only Terry and Tony (and not the store’s other employees) sold Polar Pure. They kept it hidden behind the counter, so that customers had to ask for a bottle. Polar Pure eventually became the store’s highest-grossing item.
Subsequently, Terry and his brother Tony were indicted for federal drug crimes related to the sale of Polar Pure. Tony pleaded guilty; Terry decided to go to trial and was convicted by the jury of two counts of conspiracy to distribute iodine while knowing or having reasonable cause to believe it would be used to make methamphetamine.
After trial, the government sought forfeiture in the amount of $269,751.98 which, according to the prosecution, corresponded to the store’s total profits from Polar Pure sales. Because Tony Honeycutt had already forfeited $200,000 pursuant to his plea agreement, the government asserted that Terry should have to forfeit the remaining $69,751.98. Terry, however, argued that he should not have to forfeit the Brainerd Army Store’s illicit gains from the sale of Polar Pure since as a salaried employee he lacked any ownership interest in the business and thus had never realized any of the related profits. The district court judge agreed and declined to impose any forfeiture against Terry.
On appeal, the U.S. Court of Appeals for the Sixth Circuit reversed the decision not to order forfeiture, concluding that Terry should have been held jointly and severally liable with his brother for all of the conspiracy’s profits regardless of whether he ever actually received any of the money from Polar Pure sales. United States v. Honeycutt, 816 F.3d 362 (6th Cir. 2016). In reaching this decision, the Sixth Circuit followed an earlier precedent in a RICO case and rulings by the U.S. Courts of Appeals for the Second, Third, Fourth, and Eighth Circuits, all of which had previously held that the federal narcotics forfeiture statute at issue (Title 21, U.S. Code, §853) mandated joint and several liability among co-conspirators for the proceeds of a drug conspiracy.3
Numerous courts have adopted the same interpretation of the parallel RICO forfeiture statute, and the virtually identical terms found in the general forfeiture statute applicable to Title 18 offenses such as wire or mail fraud. These cases generally cite Pinkerton in holding that a member of a conspiracy is responsible for the foreseeable acts of other members of the conspiracy taken in furtherance of the scheme.4
The Minority Rule
In United States v. Cano-Flores, 796 F.3d 83 (D.C. Cir. 2015), however, the U.S. Court of Appeals for the D.C. Circuit declined to follow all of the other circuits to have considered the issue, and rejected joint and several liability based on a close reading of the statutory language authorizing forfeiture.
In Cano-Flores, the defendant was a Mexican state police officer responsible for guarding shipments of marijuana and cocaine for a notorious cartel. He was convicted of narcotics offenses, sentenced to 35 years in prison and ordered by the district court to forfeit $15 billion (the proceeds of the entire conspiracy) jointly and severally along with all other co-conspirators in the cartel, citing the attribution principles set forth in Pinkerton.
On appeal, the defendant principally argued that the forfeiture ran afoul of the Excessive Fines Clause of the Eighth Amendment. Avoiding the constitutional issue, the D.C. Circuit instead focused on the fact that the forfeiture statute at issue (§853) did not expressly authorize imposition of forfeiture based on the total revenues of a conspiracy simply because they may have been reasonably foreseeable to its participants. Rather, the court read the statutory language as providing for forfeiture only of amounts “obtained by” the defendant on whom the forfeiture is imposed.
The Cano-Flores court observed that “[i]n ordinary English a person cannot be said to have ‘obtained’ an item of property merely because someone else (even someone else in cahoots with the defendant) foreseeably obtained it.” The court also rejected the reliance on Pinkerton as being a “doctrine which speaks only to a defendant’s substantive liability—not to the consequences of such liability.”
Issue for the Court
Congress has never incorporated joint and several liability into federal forfeiture law; that development apparently has evolved from a series of court decisions reflexively applying and extending Pinkerton without ever having given much careful thought as to the consequences.
The plain language of the statutes at issue (including those authorizing forfeiture for narcotics, RICO and fraud crimes) expressly refers to disgorgement of proceeds which the person “obtained by” violating the particular statute at issue. While the use of the phrase “directly or indirectly” might also arguably encompass property received by other people or companies under a defendant’s control, imposing joint and several liability on a conspirator who derived very little or nothing from a scheme effectively writes the “obtained by” language out of the statute altogether.
Criminal forfeiture, moreover, should focus on disgorgement of ill-gotten gains, as well as punishment tied to personal culpability. Extending forfeiture in a multi-defendant setting to include assets that were never actually acquired or possessed by that particular defendant runs counter to these basic principles of fairness. Furthermore, the rule of lenity would seem to require that the forfeiture statutes, like any other laws, be narrowly construed in this context.
As the D.C. Circuit in Cano-Flores observed, while joint and several liability works well in tort law (shifting the risk of an insolvent co-defendant to fall on a partially guilty party rather than on an innocent plaintiff), the doctrine does not necessarily make sense in connection with criminal forfeitures which are collected by the federal government. Moreover, in a typical tort case, a defendant who is held jointly and severally liable has at least the chance of securing contribution from co-defendants, but no such mechanism exists in a federal forfeiture case.
Given the existing lopsided split in the circuits, it seems unlikely that the Supreme Court has granted certiorari in Honeycutt merely to affirm the long-standing rule. Hopefully the justices will instead use this opportunity to place an important limitation on the government’s sweeping ability to wield the powerful prosecutorial tool of criminal forfeiture against individuals without regard to their relative culpability.
1. Title 21, United States Code, §853(a)(1).
2. S. Cassella, Asset Forfeiture Law in the United States (2d ed. 2013 ), §19-5.
3. United States v. Benevento, 836 F.32d 129 (2d Cir. 1988); United States v. Pitt, 193 F.3s 751 (3d Cir. 1999); United States v. McHan, 101 F.3d 1027 (4th Cir. 1996); United States v. Van Nguyen, 602 F.3d 886 (8th Cir. 2010).
4. See, e.g., United States v. Hurley, 63 F.3d 1 (1st Cir. 1995), cert. denied, 517 U.S. 1105 (1996); United States v. Genova, 333 F.3d 750 (7th Cir. 2003).