Steven L. Kessler ()
With the enactment of the Civil Asset Forfeiture Reform Act of 2000 (CAFRA), Congress sought to steer federal prosecutors to criminal forfeiture by making criminal forfeiture more inclusive and civil forfeiture less attractive.1 Congress believed that the risk of abuse would be reduced because a criminal conviction is required before a defendant’s property can be forfeited in a criminal proceeding.2
Unfortunately, it turned out that greater reliance on criminal forfeiture increased abuses in that area as well. Examples include plea agreements where the criminal defendant purportedly consents to forfeit property that does not belong to him, jeopardizing the rights of innocent third parties,3 and so-called “money judgment forfeitures,” a judge-made loophole that allows the government to forfeit property without satisfying the statutory requirement that the government trace the property sought to be forfeited to the defendant’s criminal activity.4
Another form of criminal forfeiture abuse is the imposition of joint and several liability, a remedy that, like money judgment forfeitures, is not authorized by statute. Indeed, the use of joint and several liability was in some respects an outgrowth of money judgment forfeitures, as the government could simply “pick a number” and then enforce it against every defendant alleged to have been involved in the criminal activity, regardless of the actual proceeds received by any individual defendant.
The ‘Honeycutt’ Decision
The Roberts-led Supreme Court hinted at some dissatisfaction with the state of criminal forfeiture law in recent decisions,5 but the rifle shot came in its June 5, 2017 decision in Honeycutt v. United States.6 Unconcerned with the fact that virtually every circuit court that has addressed the issue had ruled otherwise,7 the Supreme Court unanimously and unequivocally rejected the application of joint and several liability in criminal forfeiture cases.
The Honeycutt brothers were prosecuted under the federal drug laws for selling suspiciously large quantities of a legal product that they knew or should have known would likely have been used to manufacture methamphetamine. Although they were brothers, they did not profit equally from the sales of their Tennessee hardware store. Tony Honeycutt owned the store while Terry Honeycutt managed sales and inventory as an employee with no ownership interest in the business.
The government sought a money judgment against each brother in the total of $269,751.98, which it asserted was the store’s profits from the sale of the product containing the methamphetamine ingredient. Tony, the store owner, pled guilty and agreed to forfeit $200,000. Terry went to trial and was convicted on 11 of 14 counts, including conspiracy and distribution. He was sentenced to 60 months’ imprisonment.
Although it conceded that Terry had no ownership interest in the store and did not benefit personally from the sales that formed the basis for the forfeiture amount, the government sought to hold Terry jointly and severally liable for the entire amount of the store’s tainted profits and sought a money judgment of $69,751.98 against Terry, the total alleged profits of the conspiracy less the amount paid by Tony, his “co-tortfeasor.” The district court denied the government’s forfeiture request, finding that Terry had not “personally received any profits” from the unlawful sales. The Sixth Circuit reversed.
The question before the Supreme Court was whether criminal forfeiture “embrace[d] joint and several liability for forfeiture judgment.” The court noted that applying this tort doctrine to criminal forfeiture “would require that each defendant be held liable for a forfeiture judgment based not only on property that he used in or acquired because of the crime, but also on property obtained by his co-conspirator.”8
The court found that the statute “defines forfeitable property solely in terms of personal possession or use,” as it specifically “limits forfeiture to property the defendant ‘obtained … as the result of’ the crime.” Under the law and ordinary usage, the court said, “obtaining” property means personally acquiring or securing possession of it.9 Further, while §853(a)(1) provides that forfeitable property may be “obtained, direct or indirectly,” obtaining property indirectly still requires that the defendant actually receive it.10
Further, the court found, criminal forfeiture statutes consistently separate the treatment of tainted property from that of untainted property, a crucial distinction that is not preserved by the application of joint and several liability.11 A prime example is the substitute assets provision, which permits forfeiture of untainted assets of the defendant only if sufficient tainted property of the defendant cannot be located as a result of “any act or omission of the defendant.”12
This provision, the court held, demonstrates that “Congress did not authorize the Government to confiscate substitute property from other defendants or co-conspirators; it authorized the Government to confiscate assets only from the defendant who initially acquired the property and who bears responsibility for its dissipation. Permitting the Government to force other co-conspirators to turn over untainted substitute property would allow the Government to circumvent Congress’s carefully constructed statutory scheme.”13
The court rejected the government’s contention that the “bedrock principle” of joint and several liability of co-conspirators must be read into the statute, holding that the criminal forfeiture laws must be enforced as written. The precept that forfeiture statutes must be strictly construed against the government is largely a civil in rem forfeiture principle that has rarely been applied in a criminal forfeiture context.14 But that is precisely what the Supreme Court in Honeycutt did. Taking a historical approach, the court demonstrated that criminal forfeiture is derived from civil forfeiture and subject to the same limitations.15
Thus, the Supreme Court held that joint and several liability does not apply to criminal forfeiture. Only assets obtained directly or indirectly by a defendant are subject to forfeiture.
Implications of ‘Honeycutt’
The Supreme Court’s conclusion that, with the passage of the criminal forfeiture laws, “Congress did not … enact any ‘significant expansion of the scope of property subject to forfeiture,’”16 has placed criminal forfeiture in the same context of forfeiture jurisprudence as civil forfeiture. Criminal forfeitures should be disfavored, just like civil forfeiture. Criminal forfeiture statutes should be narrowly construed, just like civil forfeiture statutes.
The Supreme Court’s reasoning can and should be applied to invalidate money judgment forfeitures as well. Indeed, the court’s analysis echoes the lone surviving decision rejecting money judgments, United States v. Surgent,17 a 2009 decision from the Eastern District of New York. In a lengthy, well-reasoned opinion, Judge John Gleeson rejected the numerous cases approving money judgment forfeitures because they all relied to some degree on “the novel proposition that a remedy or sanction not expressly forbidden by Congress is thereby authorized by it.”18
This is the same reasoning the courts have cited for applying joint and several liability. That reasoning has now been rejected by the Supreme Court in Honeycutt.19 As Honeycutt makes clear, the standard is not whether Congress has forbidden a remedy, but whether it has specifically authorized it. That is a test—now the law of the land—that applies to any forfeiture sanctions or remedies, civil or criminal. Forfeiture is purely statutory, without any basis in civil law or equity.
Criminal forfeiture statutes require the government to trace the property sought to be forfeited to a particular defendant. Both money judgments and joint and several liability contravene this requirement. If, after Honeycutt, prosecutors are finally required to satisfy the tracing requirement, the abuse of criminal forfeiture should be markedly reduced. If not, perhaps the Supreme Court will take on money judgments directly, leading them to the same demise as joint and several liability.
1. See United States v. Capoccia, 503 F.3d 103, 116 (2d Cir. 2007) (Sotomayor, J.) (CAFRA’s expansion of criminal forfeiture was intended “to prevent abuse of the civil forfeiture process … by encouraging the government to seek forfeiture through criminal proceedings, where it would have to link targeted property to a specific criminal conviction”) (citing H.R. Rep. 016-192, at 8 (1999); 146 Cong. Rec. S1753-02; CAFRA §16, 114 Stat. at 221 (“Encouraging Use of Criminal Forfeiture as an Alternative to Civil Forfeiture”). Prior to CAFRA, there were a number of categories for which only civil forfeiture was available. CAFRA expanded criminal forfeiture to permit the government to forfeit any property that could be forfeited civilly. See 28 U.S.C. §2461(c). Other provisions sought to make civil forfeiture less attractive, such as a stepped-up burden of proof and the availability of market-rate attorneys’ fees for successful claimants in civil forfeiture cases rather than the far lower capped fees available under the Equal Access to Justice Act. Compare 28 U.S.C. §2465(b)(1) (CAFRA fees provision) with 28 U.S.C. §2412(d) (EAJA fees provision).
2. Remarkably, it appears that Attorney General Jeff Sessions wishes to return to the days when civil forfeiture was king. See C. Ingraham, “Jeff Sessions wants police to take more cash from American citizens,” Washington Post, July 17, 2017. Only time will tell if we again revert back to the dark ages.
3. At least one decision involving this issue is pending on appeal. See United States v. Nicoll, No. 15-2901 (3d Cir.), appealing, inter alia, United States v. Nicoll, 2015 WL 4251134 (D.N.J. July 9, 2015); United States v. Nicoll, 2015 WL 4251088 (D.N.J. July 9, 2015) (Chesler, J.).
4. Money judgment forfeitures, if they were ever needed at all, were rendered superfluous by two statutory amendments. First, where money and other fungible property is sought, the government need not trace it to the criminal activity. However, the statute of limitations is shortened from five years to one year. 18 U.S.C. §984. The other provision relates to “substitute assets,” discussed below. See 21 U.S.C. §853(p). Nevertheless, courts have continued to permit the government to exploit this judge-made loophole. See, e.g., United States v. Blackman, 746 F.3d 137 (4th Cir. 2014); United States v. Hampton, 732 F.3d 687, 691-92 (6th Cir. 2013); United States v. Padron, 527 F.3d 1156 (11th Cir. 2008); United States v. Day, 524 F.3d 1361 (D.C. Cir. 2008); United States v. Jarvis, 499 F.3d 1196 (10th Cir. 2007); United States v. Vampire Nation, 451 F.3d 189 (3d Cir. 2006); United States v. Casey, 444 F.3d 1071 (9th Cir. 2006); United States v. Hall, 434 F.3d 42 (1st Cir. 2006).
5. See, e.g., Luis v. United States, 578 U.S. ___, 136 S. Ct. 1083 (March 30, 2016). Luis resolved a split in the circuits in holding that criminal forfeiture law does not permit the pretrial restraint of substitute property, i.e., property not shown to be proceeds of or involved in criminal activity.
6. Honeycutt v. United States, ___ U.S. ___, 2017 WL 2407468 (June 5, 2017).
7. The Supreme Court noted that the Second, Third, Fourth and Eighth Circuits had held in favor of applying joint and several liability to criminal forfeitures, while the D.C. Circuit had ruled against application of the doctrine. See Honeycutt, 2017 WL 2407468, *4 n.1 (citing United States v. Cano-Flores, 796 F.3d 83, 91 (D.C. Cir. 2015); United States v. Van Nguyen, 602 F.3d 886, 904 (8th Cir. 2010); United States v. Pitt, 193 F.3d 751, 765 (3d Cir. 1999); United States v. Benevento, 836 F.2d 129, 130 (2d Cir. 1988) (per curiam)). The Sixth Circuit also ruled in favor of joint and several liability in Honeycutt itself, the decision reversed by the Supreme Court. See United States v. Honeycutt, 816 F.3d 362 (6th Cir. 2016).
8. Honeycutt v. United States, 2017 WL 2407468, *4.
9. Id., 2017 WL 2407468, *6. The court even cited the dictionary definition of “obtain” from 1966, when §853 was enacted, as well as a 1933 edition of the unabridged Oxford English Dictionary, the current edition of Black’s Law Dictionary and a recent decision of its own. Not surprisingly, the court found that the definition of “obtain” has remained constant through the decades. Id. (citing Random House Dictionary of the English Language 995 (1966); 7 Oxford English Dictionary 37 (1933); Black’s Law Dictionary 1247 (10th ed. 2014); Sekhar v. United States, 570 U.S. ___, 133 S. Ct. 2720 (2013) (“Obtaining property requires ‘… the acquisition of property’.”)).
10. Id. 2017 WL 2407468, *6 (noting provisions limiting forfeiture of property used to facilitate a crime to “the person’s property,” and property related to a continuing criminal enterprise to the defendant’s “‘interest in’ the enterprise”) (citing 21 U.S.C. §§853(a)(2)-(3)).
11. Honeycutt v. United States, 2017 WL 2407468 (citing 21 U.S.C. §853(c) (relation back provision applies only to “tainted property obtained as the result of or used to facilitate the crime.”); §853(e)(1) (pretrial restraint provision limited to property that the government proves, at a hearing, “has the requisite connection” to the charged criminal activity); §853(d) (rebuttable presumption that property is subject to forfeiture applies only to property “acquired by [the defendant] during the period of the violation” and where there is “no likely source for such property” other than the crime); Luis v. United States, 136 S. Ct. at 1090 (relation back applies only to tainted property); Kaley v. United States, 571 U.S. ___, 134 S. Ct. 1090, 1095 & n.11 (2014) (“forfeiture applies only to specific assets”)).
12. 21 U.S.C. §853(p).
13. Honeycutt v. United States, 2017 WL 2407468, *8.
14. Compare United States v. One 1936 Model Ford V-8 De Luxe Coach, Motor No. 18-3306511, 307 U.S. 219, 226 (1939) (“Forfeitures are not favored; they should be enforced only when within both letter and spirit of the law”) with United States v. Russello, 464 U.S. 16, 20 (1983) (in criminal forfeiture case under the Racketeer Influenced and Corrupt Organizations Act, rejecting petitioner’s argument that “criminal forfeitures are disfavored” and that criminal forfeiture statutes should be “strictly construed” against the government).
15. Honeycutt v. United States, 2017 WL 2407468, *9 (“[t]he thing [was] primarily considered as the offender, or rather the offence [was] attached primarily to the thing. … [The forfeiture] “proceeding in rem st[ood] independent of, and wholly unaffected by any criminal proceeding in personam” against the defendant … [With the enactment of the criminal forfeiture provision of section 853], “Congress altered this distinction … by effectively merging the in rem forfeiture proceeding with the in personam criminal proceeding and by expanding forfeiture to include not just the ‘thing’ but ‘property … derived from … any proceeds’ of the crime”) (quoting The Palmyra, 12 Wheat 1, 14-15 (1827)) .
16. Honeycutt v. United States, 2017 WL 2407468, *9 (quoting S. Rep. 98-225).
17. United States v. Surgent, 2009 U.S. Dist. LEXIS 72563 (E.D.N.Y. Aug. 17, 2009).
18. United States v. Surgent, 2009 U.S. Dist. LEXIS 72563, *47. In a footnote in an unrelated case, the Second Circuit acknowledged Judge Gleeson’s “thorough discussion” of the validity of money judgments but found it, “[i]n the end … unpersuasive.” United States v. Awad, 598 F.3d 76, 79 n.5 (2d Cir. 2010). The Second Circuit in Awad stated that “we join our sister courts of appeal in holding that §853 permits imposition of a money judgment on a defendant who possesses no assets at the time of sentencing.” 598 F.3d at 78 (citations omitted). And, with that, the Surgent decision seemingly disappeared, relegated to the cabinet of legal curiosities.
19. It is also notable that both the Supreme Court in Honeycutt and Judge Gleeson in Surgent rejected the government’s reliance on a ‘catch-all’ criminal forfeiture provision stating that the law “shall be liberally construed to effectuate its remedial purposes.” 21 U.S.C. §853(o). See Honeycutt, 2017 WL 2407468, *9, n.2 (“the Court cannot construe a statute in a way that negates its plain text, and here, Congress expressly limited forfeiture to tainted property that the defendant obtained … . [T]hat limitation is incompatible with joint and several liability”); Surgent, 2009 U.S. Dist. LEXIS 72563, *16 (“I conclude that the statute does not authorize the award of a personal money judgment, and that the availability of such judgments in this case is not necessary to effect the remedial purpose” of the criminal forfeiture statute).