By Donald R. Dancer*
May 2016
Image via Flickr | CC BY-SA 2.0
One of the more interesting cases recently decided by the US Supreme Court was also one of the least publicized. In Luis v. United States (No. 14-419),[1] the US Supreme Court, in a 5-3 decision issued on March 30, 2016, limited the ability of the government to freeze assets of criminal defendants who had not yet been convicted of a crime where the defendant sought to use the assets to pay for legal counsel. The case involved Sila Luis, a Florida healthcare business operator who was indicted in 2012 in connection with a Medicare scheme which allegedly defrauded the government of $45 million. Luis managed to spend whatever money she received from the government but retained $2 million of “untainted assets” which could not be traced back to any alleged illegal activity.
The government sought to freeze these assets under a federal statute (18 USC § 1345(a)(2)) which permits seizures of property “obtained as a result of” a crime, property “traceable” to a crime and other “property of equivalent value” (including presumably untainted assets). The government was granted a pre-trial order freezing the $2 million for the purpose of payment of restitution and criminal penalties should Luis ultimately be convicted. Luis said she intended to use the $2 million to pay for her legal defense and argued that the freezing of the assets violated her Sixth Amendment right to the “assistance of counsel” of her choice. The District Court acknowledged that the order might prevent Luis from hiring the lawyer she sought, but held that Luis did not have a fundamental right to use the untainted assets to pay for her defense. The Eleventh Circuit Court of Appeals affirmed.
The Supreme Court reversed, with five justices concluding that this restraint on Luis’ ability to use untainted assets for her defense violated the Sixth Amendment. The case is interesting, in part, because the Court couldn’t agree on a clear rationale for the decision and the Court split along lines unusual for a court that the press often sees as a regular 4-4 split between the Court’s liberal and conservative justices. The Court had previously ruled in 2014 (in Kaley v. United States[2]) that there is no Sixth Amendment right to hire counsel using tainted assets, the view being, in part, that a thief should not be able to use stolen assets to pay for his legal defense.
Justice Stephen Breyer’s plurality opinion in Luis (joined by Justices Roberts, Ginsburg and Sotomayor) emphasized that the Sixth Amendment protects a Defendant’s “right to be represented by an otherwise qualified attorney whom that defendant can afford to hire.” It concluded that, while the government may have an interest in preserving a defendant’s assets to pay future penalties and damages, that interest did not outweigh Luis’ Sixth Amendment right to use her assets in order to hire a counsel of her choosing. Breyer noted that the Court had previously said that the Sixth Amendment grants defendants “a fair opportunity to secure counsel of his own choice.” For the plurality, a pre-trial seizure of assets “could erode the right to counsel to a considerably greater extent than we have so far indicated” and “would unleash a principle of constitutional law that would have no obvious stopping place.” Breyer suggested that the Court was drawing a workable line between tainted and untainted assets needed to pay for counsel. He noted that “an unlimited power to freeze a defendant’s potentially forfeitable assets in advance of trial would eviscerate the Sixth Amendment’s original meaning and purpose.”
Justice Thomas agreed in a separate opinion, but rejected the plurality’s view of a balancing of interests. Thomas said that there was “no room for balancing” since the Sixth Amendment right to counsel was a fundamental right and it did not need to be weighed against the government’s interest in freezing the assets.
In dissent, Justice Kennedy (joined by Justice Alito) argued that the plurality opinion “rewards criminals who hurry to spend, conceal or launder stolen property.” He noted the difficulty of sorting out tainted and untainted assets utilizing a hypothetical where a person steals $1 million and wins $1 million in the lottery and puts the funds in separate bank accounts. He notes the following dilemma in this case:
If the thief spends his or her lottery winnings, the Government can restrain the stolen funds in their entirety. The thief has no right to use those funds to pay for an attorney. Yet if the thief heeds today’s decision, he or she will spend the stolen money first; for if the thief is apprehended, the $1 million won in the lottery can be used for an attorney.[3]
Basically this is about smart thieves who spend the tainted assets first. Kennedy suggests the thief should be denied both sets of assets.
Justice Kagan dissented separately and stated quickly that the Court’s 1989 ruling in Monsanto v. United States[4] was troubling. In Monsanto, the Court held that courts could grant pre-trial orders freezing a defendant’s assets, even where the defendant sought to use those assets (in that case tainted assets) to hire legal counsel. Her opinion suggests that defendants might not be stopped from using tainted assets in hiring counsel. She notes that use of the word “tainted” to describe assets at the pre-conviction stage makes an unwarranted assumption about the defendant’s guilt. If prosecutors have not yet proven the defendant committed the crime charged, then they have not yet proven that the assets are tainted. Commenting on Justice Kennedy’s hypothetical, Justice Kagan said noted the following:
The thief who immediately dissipates his ill-gotten gains and thereby preserves his other assets is no more deserving of chosen counsel than the one who spends those two pots of money in reverse order. Yet the plurality would enable only the first defendant, and not the second, to hire the lawyer he wants.[5]
Kagan suggests that neither thief in the hypothetical could be prohibited from utilizing the assets in connection with legal defense.
White collar lawyers will see the decision as making it more difficult for the government to freeze assets at early stages of litigation, particularly if the assets are used to pay counsel and when the government, in the age of sophisticated financial transactions, is tasked with clearly distinguishing the tainted and untainted nature of fungible assets like cash. The Court’s decision in Luis makes it more possible for defendants who have substantial assets to use those assets to hire the counsel they choose. It also makes it more unlikely that the government will seek pre-trial freezing of assets unless the tainted nature of the assets is relatively clear. It will also be interesting to see how the states will administer their forfeiture schemes in light of this decision.
Luis broadly re-emphasizes the Sixth Amendment’s fundamental right to assistance of counsel of one’s choice. The plurality opinion, in particular, suggests a broader concern for defendants who do not have adequate assets to secure legal representation. Justice Breyer expressed concern for innocent people who have their assets taken and are not able to hire a counsel of their choice. He worries that those who do not have adequate funds “would – by increasing the government-paid-defender workload – render less effective the basic right the Sixth Amendment seeks to protect.” If so, at what point does the weight of pressure on the public defender system lead to a surge in cases claiming ineffective assistance of counsel as well?
Image via Flickr | CC BY-SA 2.0
* Donald R. Dancer is a lawyer and former General Counsel who currently serves as a member of Elon University School of Law’s national advisory board. Dancer earned his bachelor’s degree at the University of Virginia and his juris doctor degree from DePaul University.
[1] 578 U.S. __, 136 S. Ct. 1083 (2016).
[2] __ U.S. __, 134 S. Ct. 1090 (2014).
[3] Supra note 1, at 1103.
[4] 491 U.S. 600 (1989)
[5] Supra note 1, at 1113.