Opinion analysis: No joint and several liability for federal conspiracy forfeitures
on Jun 6, 2017 at 2:23 pm
As predicted, the court yesterday ruled unanimously that the federal criminal asset forfeiture statutes are “limited to property the defendant himself actually acquired as the result of the crime.” Thus there is no “joint and several liability” for forfeiture among members of a criminal conspiracy, unless the individual conspirator “acquired” or “personally benefit[ed]” from the forfeitable property. The short opinion in Honeycutt v. United States, written by Justice Sonia Sotomayor (with Justice Neil Gorsuch not participating), did not examine the implications of these two apparent qualifications, and future criminal-forfeiture cases will undoubtedly do so. But the rejection of joint-and-several forfeiture liability, as a federal statutory matter, was clear and uncontroversial.
Unusually straightforward facts
Future litigation about the meaning of Honeycutt is likely, because most criminal conspiracy cases will not have facts as clear-cut, or as conceded, as this one. It is hard to improve on the court’s spare four-paragraph summary. Terry Honeycutt managed sales and inventory at a hardware store owned by his brother. According to the court, the government “conced[ed] that Terry had no controlling interest in the store and did not stand to benefit personally” from its sales. Over the course of three years, the store sold over 20,000 bottles of “Polar Pure” water purifier at a $269,000 profit, “despite the fact that most people have no legitimate use for the product in large quantities.” In fact, Terry and his brother were informed by the police that Polar Pure could be used to manufacture methamphetamine, and they were advised to stop selling it – but they did not. After being indicted on federal drug distribution charges, Terry’s brother pled guilty and agreed to a forfeiture judgment of $200,000.
Terry went to trial. After the jury convicted him, the government sought a forfeiture judgment against Terry for the remaining $69,000, on the theory that co-conspirators should be “jointly liable” for forfeitable criminal proceeds, just as co-conspirators can be convicted (under an old chestnut, Pinkerton v. United States) for the foreseeable criminal acts committed by other participants in the conspiracy. The district court, however, declined to order forfeiture (which is mandatory under the federal statute), because Terry “was a salaried employee who had not personally received any profits from the sales.” The U.S. Court of Appeals for the 6th Circuit reversed, based on its prior precedent. The Supreme Court granted certiorari to resolve a circuit split on the question.
Forfeiture is an important, but limited, statutory construct
Sotomayor’s opinion begins by noting that the federal forfeiture statutes “serve important governmental interests,” and that they “mandate” forfeiture upon conviction for “certain serious drug crimes.” Nevertheless, forfeitures must be consistent with the “text and structure” of the statutes. Is “joint and several liability,” a “creature of tort law” that would reach assets that a conspirator never had but that went only to other persons, embraced by the federal statutes? After providing an “instructive” example and marching through a crisp analysis of the statutory structure, Sotomayor concluded that “The Court” – interestingly, not a more informal “we” – “holds that it is not.”
Justice Sotomayor’s “instructive example”
The facts crafted for hypotheticals can often subtly, even subconsciously, influence our evaluation of legal rules. Sotomayor’s opinion for the court offers a short example involving a “farmer” and “a college student.” (Note that these hypothetical actors are perhaps more sympathetic than might be a mafia boss and his driver, or a drug-gang mastermind and his henchmen, or even a Wall Street businessman and his securities-fraud helpers. Would populating the court’s example with shadier characters change the outcome of yesterday’s opinion? It does not seem so.)
Sotomayor’s hypothetical farmer grows and distributes marijuana “on local college campuses.” The farmer pays a college student $300 a month from the illegal proceeds to deliver packages of the drug, while the farmer pockets a hypothetical one-year $3 million profit for himself. Should the college-student/deliveryman be liable, if convicted of the criminal drug distribution conspiracy, for forfeiture of $3 million, or just for the $3600 he received for his services? (And is another unstated component of this hypothetical that we presume the “college student” is impecunious – as perhaps Terry Honeycutt is — and has no other assets with which to pay a large forfeiture judgment?)
The answer: joint and several liability is “inconsistent with the statutory text and structure”
After engaging in a quick analysis of various statutory subsections, the court holds that the college student should be liable only for the $3600 he actually received. Two key points seem most important. First, the relevant statutory subsection says 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.”
Second, the federal statutes are clearly limited to forfeiture of assets “tainted” by the crime. But extending forfeiture to assets of a conspirator that cannot be traced to the crime, to satisfy a “joint and several” judgment for other assets that the conspirator never received, “would require forfeiture of untainted property,” which is inconsistent with the statutory limitation. (The court notes that in certain defined circumstances, a different statutory subsection does permit forfeiture of “substitute assets.” But that “provision begins from the premise that the defendant once possessed the tainted property” for which other assets may later be “substituted.” It does not permit substitution for assets that the defendant never had.)
Scalia’s legacy
Toward the end of her opinion, before discussing a relevant Senate report, Sotomayor inserts a qualifier: “For those who find it relevant, the legislative history confirms ….” And in a concluding footnote, she notes without hesitation that, although the statute says it “shall be liberally construed,” “the Court cannot construe a statute in a way that negates its plain text.” The fact that such statements are commonplace, even obligatory, today demonstrates that the late Justice Antonin Scalia’s repeated demands to ignore legislative history and instead adhere closely to the language of a statutory text live on, even as a newly constituted court evolves.
Future forfeiture wrinkles to be litigated
Significantly, in announcing its Honeycutt rule, the court does not examine what exactly it means for a criminal to “obtain” or “acquire” or, perhaps most interestingly, “personally benefit from” proceeds that an overall criminal conspiracy generates. The absence of such elaboration reflects not just a healthy limitation of an opinion to the facts presented – a drafting principle that Chief Justice John Roberts has often proclaimed – but also a desire to avoid more controversial implications that could disrupt the justices’ unanimous front. (The justices similarly declined to explore in detail what “personal benefit” means when Justice Samuel Alito wrote for a unanimous court in last December’s insider-trading decision, Salman v. United States.)
But such speculation is often the bread and butter of blogs. Just for example, could one argue that Terry Honeycutt “personally benefited” from the profits his brother’s store made, perhaps by maintaining his secure salaried job, maybe even with great medical benefits and free organic coffee brewing all day behind the counter? Or to suggest another tack, are monies that pass through the hands of criminal conspiracy subordinates “obtained” or “acquired” by them?
In a slightly different vein, Sotomayor notes that the forfeiture statute at issue extends to property “’obtained, directly or indirectly’” by a defendant, and she explains that her hypothetical “marijuana mastermind” might “indirectly” receive his profits by having “drug purchasers pay an intermediary such as the college student.” But she does not go on to ask: Did the college student in that example, by holding those payments in his own hands for some period of time, “acquire” them for purposes of forfeiture? In more complicated white-collar conspiracies, do securities brokers or corporate officers who receive payments generated by fraud, but ultimately pass them on to bigger bosses, “obtain” those proceeds for purposes of later forfeiture judgments? Particularly when such “subordinates” themselves have ample assets (untainted but ample) to pay such a judgment if ordered?
The real world is seldom as simple, or as factually conceded by the government, as was Terry Honeycutt’s. Alito alluded to such murky implications at oral argument, but he remained silent yesterday. One can bet, however, that the government will not be silent, but will instead aggressively pursue future forfeitures from criminal conspirators as broadly as language will allow. So as greeting-card philosophers have written, when one door closes, another one opens. There will be no shortage of federal forfeiture litigation in the future, even as Honeycutt establishes that the federal forfeiture statutes have at least some clear limits.
