On June 5, 2017, the Supreme Court of the United States ruled unanimously in Honeycutt v. United States, No. 16-142, 581 U.S. __ (2017) that the federal criminal asset forfeiture statutes are “limited to property the defendant himself actually acquired as the result of the crime.” In doing so, the Court rejected the interpretation of 10 courts of appeals that previously allowed joint and several liability for forfeiture among members of a criminal conspiracy. Ruling instead that forfeiture is permitted only when the individual conspirator “acquired” or “personally benefit[ed]” from the forfeitable property, the Court significantly curtailed a powerful tool used by prosecutors in myriad contexts, including white-collar offenses.
Future litigation is likely to ensue, however, because the Court did not define key terms and because few future cases will involve facts as clear and uncontested as the Honeycutt case. Briefly, Terry Honeycutt managed a Tennessee hardware store owned by his brother, Tony Honeycutt. Over the course of three years, the store sold significant quantities of “Polar Pure” water purifier at a profit of $269,000. According to the opinion, “most people have no legitimate use for the product in large quantities,” and the Honeycutt brothers were informed by police that Polar Pure could be used to manufacture methamphetamine. Police advised the Honeycutt brothers to stop selling the product; they refused, and were later indicted on federal drug-distribution charges. Tony Honeycutt pled guilty and agreed to a forfeiture judgment of $200,000, while Terry Honeycutt went to trial. Terry was convicted, and the government sought a forfeiture judgment against him for the remaining $69,000, reasoning that co-conspirators were “jointly liable” for forfeitable criminal proceeds in the same way that co-conspirators can be convicted for the foreseeable criminal acts committed by other co-conspirators under Pinkerton v. United States, 328 U.S. 640 (1946). The district court agreed with Terry because he “was a salaried employee who had not personally received any profits from the sales,” and the Court of Appeals for the Sixth Circuit reversed based on prior precedent.
The Court’s unanimous opinion (Justice Gorsuch did not participate) was authored by Justice Sotomayor, and first construed the plain language of the relevant provision of the Comprehensive Forfeiture Act of 1984, 21 U.S.C. § 853(a)(1). According to the court, the statute makes clear that forfeiture extends only to property “obtained” by the convicted defendant, and “neither the dictionary definition nor the common usage of the word ‘obtain’ supports the conclusion that an individual ‘obtains’ property that was acquired by someone else.” In addition, the Court explained that joint and several liability is contrary to other provisions of the forfeiture statute, and concluded that federal forfeiture statutes are limited to forfeiture of assets “tainted” by the crime. According to the Court, forfeiture of assets the co-conspirator never received “would require forfeiture of untainted property,” which is inconsistent with the statutory limitation. The Court further explained that joint and several liability would render futile section 853(p) of the forfeiture statute, which, according to the Court, is the sole provision that permits the government to confiscate “substitute assets” untainted by the crime. In sum, the Court held that “[t]he plain language and structure of Section 853 leave no doubt that Congress did not incorporate” the Pinkerton principle that conspirators are legally responsible for each other’s foreseeable actions in furtherance of their common plan.
As noted above, litigation regarding the contours of this ruling should be expected, and it is unclear what effect the decision will have on outstanding forfeiture orders in closed cases. But it is clear that the Honeycutt decision sets clear limits on the federal forfeiture statutes and will undermine the government’s ability to use criminal forfeiture to recover property in not only drug-conspiracy cases, but white-collar and fraud conspiracies as well.