November 30, 2016 Articles

Luis v. United States and the Future of Federal Forfeiture Reform

Pretrial asset-freezing moving toward reform.

Vadim A. Glozman – November 30, 2016

This year’s U.S. Supreme Court decision in Luis v. United States confirmed a criminal defendant’s right to use legally obtained funds to hire counsel of their choice. This decision comes 27 years after United States v. Monsanto, in which the Supreme Court upheld a lower court’s ability to “enter a pretrial order freezing assets in a defendant’s possession, even where the defendant seeks to use those assets to pay an attorney.” While this power to seize property before trial began during the heyday of the War on Drugs, the government has increasingly used this tool in white-collar prosecutions.

Generally, if the government can point to a legitimate reason for freezing an individual’s assets, that is good enough for courts. This usually entails a claim that the property must be preserved to guarantee payments of restitution and fines following a conviction. Many times, this asset freeze comes long before any indictment. This leaves individuals that are merely accused of a crime in financial uncertainty with little to no money to pay for their own defense.

Luis takes a look at a situation that defense attorneys have long argued against: preventing the criminally accused from using their money to pay for an attorney of their choosing. In the end, the Court’s decision proved to be a step forward in forfeiture reform.

Brief Factual Backdrop


The issue in Luis arises out of the government’s pretrial restraint of a defendant’s assets, including those that were undisputedly legitimate and completely untainted by the alleged fraud.

In Luis, the defendant was indicted for allegedly participating in a massive Medicare fraud. The indictment alleged that the charged conduct amounted to nearly $45 million in ill-gotten gains. Somehow, by the time she was charged, Luis managed to spend all of the money she allegedly stole. All she had remaining in her possession was $2 million that she did not earn through any allegedly illegal means. The government, however, was able to freeze those funds on the theory that it should be used to pay restitution and criminal penalties, should she be convicted.

The Supreme Court was left to decide whether the government denied Luis her Sixth Amendment right to “assistance of counsel” by precluding her from paying for a lawyer of her choosing using a portion of the seized untainted assets.

The Court’s Ruling


In affirming Luis’s constitutional right to use untainted assets to obtain counsel of her choosing, the Court was unable to have a majority of justices agree on a single rationale. Instead, a four-justice plurality opinion in Luis undertook the necessary task of weighing an individual’s Sixth Amendment interest of securing counsel of their choice against the government’s interest in using pretrial asset restraint as a way to protect funds that may be forfeitable upon conviction. In writing for the plurality, Justice Breyer found that “the pretrial restraint of legitimate, untainted assets needed to retain counsel of choice violates the Sixth Amendment.”

In their opinion, the plurality first considered the importance of the fundamental right to counsel and, second, the difference between tainted and untainted assets, essentially breaking it down to “the difference between what is yours and what is mine.” In this analysis, Justice Breyer likened a defendant’s ownership interest in tainted assets as imperfect, but stated that untainted assets “belong to the defendant, pure and simple.”

There was no dispute here that the $2 million seized from Luis was unrelated to the crime. As such, unlike cases in which the property was directly traceable to illegal conduct, the Court found that the government had no interest in the assets. The Court, however, was also faced with the dilemma posed by property law that gives the government the right to impose certain conditions on the current owner so that the assets would be “available to cover the costs of forfeiture and restitution if she is convicted, and if the court later determines that her tainted assets are insufficient or otherwise unavailable.”

Ultimately, the opinion affirmed the Sixth Amendment’s protection of an individuals “right to be represented by an otherwise qualified attorney whom that defendant can afford to hire.” The Court reasoned that while the government has a “contingent interest in securing its punishment of choice” and that victims of crimes have an “interest in securing restitution,” these interests are not constitutionally protected and, as compared to an individual’s right to counsel, “would seem to lie somewhere further from the heart of a fair, effective criminal justice system.”

Justice Clarence Thomas concurred with the plurality, but disagreed with their balancing-of-interests approach—he believed this had already been done when the amendment was ratified. Instead, Justice Thomas explained that the Sixth Amendment “implies the right to use lawfully owned property to pay for an attorney. Otherwise the right to counsel—originally understood to protect only the right to hire counsel of choice—would be meaningless.” It was his position that because untainted assets lack a nexus with criminal activity, they deserve constitutional protection.

Justice Kagan’s Dissent


While Justice Elena Kagan did not agree with the rationale put forth by either the plurality or Justice Thomas, her opinion barely constitutes a dissent. In her opinion, Justice Kagan begins by stating that neither the plurality, nor Justice Thomas, go nearly far enough to protect an individual’s right to counsel and further blamed the Court for taking the wrong path 27 years ago in Monsanto.

Justice Kagan found Monsanto to be “a troubling decision” and at odds with the pretrial presumption of innocence. She believed that while it is one thing to seize an individual’s assets once they are convicted of a criminal offense, “it is quite another thing to say that the Government may, prior to trial, freeze assets that a defendant needs to hire an attorney, based on nothing more than ‘probable cause to believe that the property will ultimately be proved forfeitable.’” However, unlike the instant matter, Monsanto dealt with tainted assets and would not have withstood the scrutiny of the balancing-of-interests approach taken by the plurality.

Unfortunately, Justice Kagan relied on the precedent set by Monsanto in her dissent. It was her position that although she disagrees with the power Monsanto grants the government in restraining an individual’s assets prior to a conviction, the correctness of it has not been challenged.

Future Implication of the Decision

While far from perfect, the Luis decision is a step in the right direction within the realm of forfeiture reform. Defendants that are now facing pretrial restraint or forfeiture of assets are given the opportunity to use at least a portion of those assets to retain an attorney of their choice. The Court’s decision now creates a procedural hurdle that the government must face: The government must now distinguish between tainted and untainted assets if it wishes to freeze a defendant’s assets. This, however, may prove difficult in white-collar cases involving complex financial transactions and hopefully dissuade the government from seeking this sort of restraint.

The decision also leaves significant unresolved issues; there has been no determination as to what standard of proof that courts will use in determining the legitimacy of assets, and there has been no determination whether courts will allow defendants to use untainted assets at their discretion or allow the government to freeze all assets and only release funds for the limited purpose of retaining counsel. Consequently, although defendants now have the opportunity to oppose complete pretrial asset restraint, they still may be prevented from hiring counsel of their choice to challenge any restraint levied against them.

Regardless of the remaining uncertainties, there is now hope for future arguments rooted in the Sixth Amendment. Although there was a split among the justices in their holdings and reasoning, a majority of them still seem to be considerate of the fundamental rights that the Sixth Amendment guarantees individuals. There appears to be a common ground for future right-to-counsel cases among the plurality’s check on government’s ability to restrain assets prior to trial, Justice Thomas’ original-meaning approach to the assistance-of-counsel clause, and Justice Kagan’s sympathy toward the plurality’s position. For the first time since Monsanto, the future seems bright for federal forfeiture reform.

 

Keywords: criminal litigation, asset forfeiture, Sixth Amendment, Supreme Court

 

Vadim A. Glozman is an attorney with Edward M. Genson & Associates in Chicago, Illinois.