When a criminal defendant’s assets are subject to forfeiture or an order of restitution following conviction, the federal government is typically empowered to commence a civil action prior to conviction to freeze those assets and thereby prevent their dissipation. The assets subject to a freezing order may include both tainted assets—property directly tied to the offense or traceable to it—and untainted assets—property unconnected to the offense that serves as a substitute.

What happens if the pretrial freeze of untainted assets prevents a defendant from hiring counsel of her choice?

In Luis v. United States, a divided U.S. Supreme Court in March held that a defendant has a preconviction right under the Sixth Amendment to use untainted assets to pay attorney fees.
The decision nevertheless leaves a number of questions unanswered.

As an initial matter, it is debatable whether Luis requires assessing the reasonableness of attorney fees in each case or, instead, flatly prohibits the pretrial freeze of untainted assets. In addition, “tracing” rules—which are used to separate assets in a variety of circumstances—will receive increased scrutiny as courts determine whether a defendant’s assets are tainted or innocent.

Finally, the Supreme Court may soon be confronted with calls to overturn decadesold precedent that permits the pretrial freeze of tainted assets.

The question that Luis answers

A pair of cases, decided the same day in 1989, resolved questions about a defendant’s right to use “tainted” assets to pay for an attorney of his choice. In Caplin & Drysdale v. United States, the Supreme Court rejected the claim that a convicted defendant was deprived of his Sixth Amendment right to counsel because the forfeiture of tainted assets prevented him from paying his attorney of choice. In United States v. Monsanto, the court relied on Caplin & Drysdale in holding that a defendant who had not been convicted likewise lacked a Sixth Amendment right to use tainted assets to pay legal fees.

Which brings us to Luis. The indictment there charged that the defendant had received $45 million in improper Medicare benefits and sought forfeiture of those payments. Luis’ assets, however, totaled only $2 million, some of which were untainted.

Invoking a statute that permits the pretrial freezing of both tainted and untainted assets, the government obtained an order preventing Luis from spending any of her assets on her counsel of choice. Citing Caplin & Drysdale and Monsanto, the U.S. Court of Appeals for the Eleventh Circuit rejected Luis’ constitutional challenges.

The Supreme Court granted certiorari to decide “[w]hether the pretrial restraint of a criminal defendant’s legitimate, untainted assets (those not traceable to a criminal offense) needed to retain counsel of choice violates the Fifth and Sixth Amendments.”

In ruling against the government, the eight-member Supreme Court fractured in an unusual 5-3 split that cut across traditional “left-right” lines. (Justice Antonin Scalia died before the case was decided.)
Writing for the plurality, Justice Stephen Breyer—joined by Chief Justice John Roberts Jr. and Justices Ruth Bader Ginsburg and Sonia Sotomayor—distinguished Monsanto and Caplin & Drysdale on the ground that those decisions involved tainted assets, whereas the assets at issue in Luis were “innocent.”

The plurality then balanced the defendant’s right to counsel of choice against the government’s interests, concluding that the balance tipped in the defendant’s favor. The plurality also defended the workability of its rule, expressing confidence that courts can use “tracing” rules to differentiate tainted from untainted assets and police whether legal fees are reasonable.

Justice Clarence Thomas provided the fifth vote but concurred only in the judgment. He rejected the plurality’s balancing approach in favor of a bright-line rule against preconviction freezing of untainted assets.

In the principal dissent, Justice Anthony Kennedy—joined by Justice Samuel Alito Jr.—took the position that Caplin & Drysdale and Monsanto controlled the outcome. In a separate dissent, Justice Elena Kagan questioned the legitimacy of Monsanto but took the validity of that decision as a given because Luis had not asked the Supreme Court to overrule or modify it.

Questions Luis does not answer

Luis cabined Monsanto and signaled a new-found concern with the abusive potential of pretrial asset freezes.

Before Luis, the government could affect the conduct of criminal litigation—including the calculus employed in deciding whether to plead guilty—by preventing defendants with untainted assets from hiring counsel of their choice. Luis disables the government from doing that.

While Luis has recalibrated the balance of power between the prosecution and the defense, the high court’s decision leaves a number of questions unanswered.

First, under Marks v. United States, when there is no majority opinion the controlling opinion is deemed to be the one that rests on the narrowest grounds. The controlling opinion is frequently a one-justice concurrence.

In Luis, however, Thomas’ concurrence—which advocates a bright-line rule against any pretrial freeze of untainted assets—is arguably broader than the plurality opinion, which seems to acknowledge that some pretrial freezes of untainted assets may be appropriate if sufficient funds exist to pay reasonable legal fees.

Suppose that a defendant will likely be subject to a $500,000 restitution order upon conviction, that he has already spent the allegedly tainted assets, and that he has $600,000 in untainted assets. The government may claim that it can freeze $500,000 because the defendant will be able to retain $100,000 to pay reasonable attorney fees.

But what if the government and the defendant disagree about whether $100,000 is reasonable?

Under Thomas’ approach, the answer to this hypothetical is simple: The Sixth Amendment bars the preconviction freeze of untainted assets, period. This obviates the need for a court to resolve any disagreement about the reasonableness of fees. But if the plurality’s approach is deemed controlling, a court will be forced to do so. Although the plurality was confident that courts have experience determining “how much money is needed to cover the costs of a lawyer,” this approach certainly invites litigation.

Second, regardless of which opinion controls under Marks, there will be increased attention to the distinction between tainted and untainted assets, because a defendant can use only untainted funds to pay for counsel of choice.

On this front, it is important to note that defendants have a right to a hearing to challenge whether their assets are traceable to criminal activity. As a consequence, the tracing rules debated by the plurality and principal dissent in Luis will likely play a prominent role in future litigation.

Finally, Kagan’s separate dissent invites future challenges to Monsanto. That does not mean, however, that a defendant who responds to such an invitation will necessarily prevail. Although she questioned Monsanto’s reasoning, Kagan stopped short of calling for it to be overruled. The pull of stare decisis, moreover, is strong. And of course five votes are needed to overturn any precedent.

A defendant who seeks to have Monsanto overruled will accordingly face an uphill climb. But such a challenger will have fresh ammunition—principally in the form of Kagan’s dissent in Luis, but also in the plurality’s clear limitation on Monsanto’s holding.

And whatever the future may hold for Monsanto, which concerns tainted assets, a defendant’s right to counsel of choice, under Luis, now trumps the government’s ability to freeze untainted assets.

Reprinted with permission from the May 23, 2016 edition of The National Law Journal © 2016 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

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