The Potential Forfeiture of Attorney Fees: A Minefield for Defense Attorneys

Circumstances Where Government Can Seize Attorney Fees: U.S. Supreme Court

In a series of decisions, the Supreme Court has affirmed that the government can seize attorney fees both pre- and post-conviction in certain circumstances, and, as long as there is probable cause, such seizure does not violate a defendant’s Sixth Amendment right to counsel.

In Caplin & Drysdale, Chartered v. United States, 491 U.S. 617 (1989), the Court considered a post-conviction forfeiture under 21 U.S.C. § 853 that seized funds from a defendant that he would have used to pay his lawyer. The Court held the Sixth Amendment’s “protection does not go beyond ‘the individual’s right to spend his own money to obtain the advice and assistance of counsel.’” (Id. at 625–26.) In finding that the forfeiture was constitutional, the Court emphasized that the forfeiture statute provided that all “right, title, and interest in property [constituting or derived from any proceeds obtained from the crime] ‘vests in the United States upon commission of the act giving rise to forfeiture.’” (Id. at 625 n.4.)

In United States v. Monsanto, 491 U.S. 600 (1989), the Court considered the government’s pretrial restraining order under the same forfeiture statute to prevent a defendant from using certain assets to pay for his lawyer. Although the challenge to the assets was pretrial, the Court noted that the property at issue was forfeitable and that the application of the forfeiture statute concerned only the restraint of assets that were traceable to the alleged crime. The Court concluded that if the government can forbid the use of forfeited assets to pay an attorney post-trial, no “constitutional violation occurs when, after probable cause is adequately established, the Government obtains an order barring a defendant from frustrating that end by dissipating his assets prior to trial.” (Id. at 616.)

In United States v. Kaley, 571 U.S. 320 (2014), the defendants challenged pretrial restraint of their assets under the same forfeiture statute that kept them from hiring their counsel of choice, arguing that the trial court should conduct a determination of whether there was probable cause for the asset freeze based on a grand jury indictment. The Court first noted, “an asset freeze depriving a defendant of that interest is erroneous only when unsupported by a finding of probable cause.” (Id. at 337 (emphasis in original).) Rejecting the request that such a hearing is constitutionally required when there is a potential interference with the Sixth Amendment right to counsel of choice, the Court held:

[A]n adversarial process is far less useful to the threshold finding of probable cause, which determines only whether adequate grounds exist to proceed to trial and reach that question. The probable cause decision, by its nature, is hard to undermine, and still harder to reverse. So, the likelihood that a judge holding an evidentiary hearing will repudiate the grand jury’s decision strikes us, once more, as “too slight” to support a constitutional requirement.

Id. at 339 (citation omitted).

Most recently, the Supreme Court announced a scenario in Luis v. United States, 136 S. Ct. 1083 (2016), where the government cannot seize funds for a client’s attorney. In Luis, the trial court entered an order freezing the defendant’s untainted assets to preserve them in case there was a conviction and funds traceable to the violation could not be located so that the assets could be used to pay any fine, restitution, or forfeiture. Previous decisions upholding asset freezes did not support issuing one in this context because “both Caplin & Drysdale and Monsanto relied critically upon the fact that the property at issue was ‘tainted,’ and that title to the property therefore had passed from the defendant to the Government before the court issued its order freezing (or otherwise disposing of) the assets.” (Id. at 1090.) That difference was crucial. Luis provides at least one significant limitation on the government’s power to freeze assets before trial when defendants can show they are untainted by any criminal conduct so that they can be used to retain counsel of choice.

Defendants’ Right to Challenge Seizure of Attorney Fees

The Supreme Court has declined to decide whether a defendant has a constitutional right to a hearing on “whether probable cause exists to believe that the assets in dispute are traceable or otherwise sufficiently related to the crime charged in the indictment.” (United States v. Kaley, 571 U.S. 324 n.3 (2014).) A number of circuit courts have agreed that a defendant does have a right to such a hearing. For example, the Sixth Circuit has provided a framework to guide and define such a hearing only when the defendant can “(1) ‘demonstrate to the court’s satisfaction that [he/she] has no assets’ and (2) ‘make a prima facie showing of a bona fide reason to believe the grand jury erred in determining that the restrained assets constitute or are derived, directly or indirectly, from gross proceeds traceable to the commission of the offense.’” (United States v. Jamieson, 427 F.3d 394, 406 & n.3 (6th Cir. 2005) (citing United States v. Jones, 160 F.3d 641 (10th Cir. 1998) and collecting cases from the Second, Fourth, Seventh, Ninth, and Tenth Circuits).) If a defendant makes the required showings, “the burden then shifts to the prosecution to establish, by probable cause at an adversarial hearing, that the restrained assets are traceable to the underlying offense.” (Jamieson, 427 F.3d at 406.)

Attorneys’ Duty to Inquire as to Client’s Source of Attorney Fees

Courts have held that attorneys have at least some duty to inquire as to the source of attorney fees being paid by their clients. Although courts have found that the scope and trigger for an attorney’s duty to inquire vary case by case, the case law makes clear that some amount of good-faith inquiry as to the source of assets and/or funds for payment of attorney fees is necessary. For example, an inquiry of a prospective client could include the following, both orally and in a retainer letter:

• That the attorney/firm is not permitted to accept monies for fees and/or costs that are proceeds of criminal activity;
• That the client is making a good-faith representation to the best of his or her knowledge and belief that any payments of fees and/or costs made are not proceeds of criminal activity but are instead resulting from lawful activities and/or sources; and/or
• That the funds used to pay fees and/or costs are not derived from the activity and/or sources that are the subject of the pending criminal investigation.

If a client retains an attorney post-indictment, the attorney should conduct due diligence using the indictment itself to determine, if possible, whether the funds proposed for payment of attorney fees and costs are related to the alleged criminal charges.

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This article is an abridged and edited version of one that originally appeared on page 7 Criminal Justice, Spring 2023 (38:1).

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