Luis v. United States (14-419)

Issues 

May the US Government obtain a preliminary injunction under 18 U.S.C. § 1345 to prohibit a defendant from spending assets unrelated to the crime charged without violating a defendant’s right to hire an attorney of choice?

Oral argument: 
November 10, 2015

The Supreme Court’s decision in this case will determine whether the United States Government can constitutionally obtain a preliminary injunction under 18 U.S.C. § 1345 (“§ 1345”) to prohibit a defendant facing federal fraud charges from spending assets not derived directly from the charged crime. See Brief for Petitioner, Sila Luis at i. Luis argues that such a preliminary injunction violates a defendant’s right to counsel under the Sixth Amendment, and that the language of § 1345 does not allow the Government to restrain spending of untainted assets. See id. at 17–18, 34–35. Luis also asserts that even if a preliminary injunction of untainted assets is constitutional, the district court violated Fifth Amendment Due Process by failing to determine whether the Government was entitled, beyond a reasonable doubt, to the untainted assets. See id. at 44. On the other hand, the United States argues that the Supreme Court has previously held the Government’s restraint of all assets in a defendant’s possession to be constitutional, so long as the Government can show probable cause that the assets are forfeitable even if the defendant needs those assets to pay for counsel. See Brief for Respondent, United States at 25–26. The Court’s decision could significantly impact criminal defendants’ ability to hire private counsel in cases of federal fraud and will also shape U.S. asset forfeiture law. See Brief of Amicus Curiae American Bar Association, in Support of Petitioner at 7; see also Brief of Amici Curiae National Association of Criminal Defense Lawyers et al., in Support of Petitioner at 5–6.

Questions as Framed for the Court by the Parties 

Did a pretrial injunction prohibiting a defendant from spending untainted assets to retain counsel of choice in a criminal case violate the Fifth and Sixth Amendments?

Facts 

Petitioner Sila Luis provided health care to homebound patients through her two businesses, LTC Professional Consultants, Inc. and Professional Home Care Solutions, Inc., of which she was both owner and operator.  See Brief for Petitioner, Sila Luis at 5. On October 2, 2012, Luis, along with two other individuals, was indicted for paying and conspiring to pay kickbacks for patient referrals and conspiring to defraud Medicare. See id. Specifically, the Government charged Luis with conspiracy to commit healthcare fraud under 18 U.S.C. § 1349, conspiracy to defraud the United States and commit offenses against the United States under 18 U.S.C. § 371, paying kickbacks involving federal healthcare programs as prohibited under 42 U.S.C. § 1320a-7b(b)(2)(B), and finally, with criminal forfeiture under 18 U.S.C. § 982. See United States v. Luis, 966 F. Supp. 2d 1321, 1326 (2013).

Federal Bureau of Investigation Special Agent Clint Warren, who previously investigated Luis’s businesses for federal health care fraud and received information from witnesses regarding Luis’s alleged fraud, testified at trial. See id. The witnesses reported to Special Agent Warrant that Luis’s businesses had defrauded Medicare from January 2006 to January 2012. See id. The businesses allegedly paid nurses to recruit patients, and the nurses then allegedly gave a portion of those kickbacks to the patients.  See id. at 27. The businesses also allegedly billed Medicare for medical services that were either unnecessary or not actually provided to patients. See id. Medicare paid out a total of $45 million to Luis’s business during the period of her alleged fraudulent activity. See id.

The United States brought a civil action under 18 U.S.C. § 1345 in the District Court for the Southern District of Florida to restrain $45 million worth of Luis’s assets before the criminal trial, including substitute assets that were not directly linked to the alleged charges. See United States v. Luis, 564 F. App’x 493, 494 (2014). The court first granted a temporary restraining order against the assets, then granted the Government’s motion for a preliminary injunction upon a hearing on that motion. See id. The court found that Special Agent Warren’s testimony had established probable cause to satisfy the elements of  § 1345, which allows courts to grant preliminary injunctions to prevent a defendant from alienating property associated with certain types of fraud, such as federal health care fraud. See Luis, 966 F. Supp. 2d at 1325, 1327.

Luis appealed the preliminary injunction order to the Eleventh Circuit of the United States Court of Appeals, arguing that the injunction violated her constitutional rights by restraining money that she needed to hire a criminal defense attorney. Luis, 546 F. App’x at 494. The Eleventh Circuit affirmed the district court’s decision, holding that the U.S. Supreme Court’s decisions in Kaley v. United States, Caplin & Drysdale Chartered v. United States, United States v. Monsanto, and United States v. DBB, Inc. foreclosed Luis’s arguments.  See id. Luis petitioned for a rehearing en banc, but the Eleventh Circuit denied the petition. See Brief for Petitioner at 14. The U.S. Supreme Court granted a writ of certiorari on June 8, 2015 in order to resolve a circuit split concerning whether the government's restraint of a defendant's untainted assets needed to hire private counsel violates the Fifth and Sixth Amendments. See Order List, 576 U.S.         (2015); Petition for Writ of Certiorari at i.

Analysis 

The parties in this case disagree over the scope of a preliminary injunction barring a defendant from using forfeitable assets. See Brief for Respondent, United States at 48.

Luis argues that the preliminary injunction can only enjoin tainted assets (assets derived directly from the crime) because she has a right to use the untainted assets to retain counsel. See Brief for Petitioner, Sila Luis at 18. Additionally, Luis argues that untainted assets should be treated in a different manner from tainted assets, specifically as they relate to the relation-back doctrine. See id. at 22. Luis also contends that the standard of proof in a § 1345 pretrial hearing should constitute something more than probable cause. See id. at 54. The United States, on the other hand, argues that a court may enjoin both directly forfeitable assets (assets derived from the crime) and substitute assets (assets used to fulfill the rest of the judgment) because the Government has the right to use both types of assets to fulfill a criminal judgment.  See Brief for Respondent at 33. The United States further maintains that the standard of proof in a § 1345 pretrial hearing should be probable cause. See id. at 46.

RIGHT TO USE UNTAINTED ASSETS TO RETAIN COUNSEL OF CHOICE

Luis asserts that the Sixth Amendment to the Constitution ensures that defendants retain a right to counsel. See Brief for Petitioner at 22.  Luis contends that she has a right to use the untainted assets to retain counsel consistent with the Sixth Amendment. See id. at 18.  Luis argues that, although the Government wants to enjoin the untainted assets in order to fulfill a potential criminal monetary judgment, that reason is insufficient in light of her Sixth Amendment rights. See id. at 17. Allowing the Government to enjoin untainted assets, she claims, “undermines the adversarial system of justice” by taking away her ability to retain the counsel of her choice. Id. at 18. Without the untainted assets, Luis argues that she would be unable to exercise her rights meaningfully as guaranteed under the Sixth Amendment. See id. at 29.

The United States, however, contends that while the Sixth Amendment does give a defendant the right to counsel, the Sixth Amendment does not give a defendant the right to counsel that the defendant cannot afford. See Brief for Respondent at 27. Furthermore, the United States asserts that the Government has a strong interest in ensuring that assets (whether directly forfeitable or substitute assets) will be available to compensate the victims of the crime in a criminal monetary judgment. See id. at 33.  According to the United States, the adversarial system would not be compromised because the defendant would still have publicly appointed counsel to adequately advocate her position. See id. at 41.

TREATMENT OF UNTAINTED ASSETS VERSUS TAINTED ASSETS

Luis concedes that the Government may enjoin the tainted assets without violating the Sixth Amendment because of the relation-back doctrine. See Brief for Petitioner at 22.  Luis asserts that, under the relation-back doctrine, the Government has a right to any assets that the defendant obtained from the offense. See id. She argues, however, that the relation-back doctrine does not apply to untainted assets. See id. at 23. Therefore, Luis asserts that she should be able to retain her property right in the untainted assets prior to trial and use those assets to retain counsel. See id.

Luis further argues that 18 U.S.C. § 1345(a)(2) maintains that if the assets seized contain both tainted assets and untainted assets, then only the tainted assets should be enjoined in the pretrial hearing. See id. at 33. According to Luis, if the Government cannot show that the assets are tainted, then the Government has no right to stop her from using the assets to retain counsel. See id. at 37.  

The United States counters, arguing that Luis misinterprets the relation-back doctrine. See Brief for Respondent at 33. The relation-back doctrine, according to the United States, preserves the potential of forfeiture of both directly forfeitable assets and substitute assets. See id. The United States argues that if the directly forfeitable assets are not enough, a court will use the substitute assets to fulfill a criminal monetary judgment. See id. According to the United States, a court may therefore treat both types of assets equally in order to ensure the fulfillment of the judgment without running afoul of the relation-back doctrine. See id.

The United States also argues that treating the assets differently would lead to what it calls “absurd and unfair results.” Id. at 36. The United States claims that the Government would be unable to enjoin assets from a defendant who has already used up the directly forfeitable assets. See id. at 37.  On the other hand, the United States asserts that the Government would be able to enjoin assets from a similarly situated defendant who completely used the substitute assets and only had directly forfeitable assets. See id. The United States claims that the Court, by following Luis’ proposed argument, would be unjustly rewarding what it calls a “rapid dissipation of criminal proceeds.” Id.

The United States contends that §1345(a)(2) maintains that “property of equivalent value” may also be enjoined to ensure that the criminal monetary judgment will be fulfilled. Id. at 2.  Specifically, the United States claims that a court can enjoin substitute assets for the same reason that it can enjoin directly forfeitable assets. See id. at 30. While the United States agrees that the Government does not have a current property interest in the assets, the Government has a right to preserve the future property interest from the likely criminal monetary judgment. See id. at 33.

DUE PROCESS SCRUTINY STANDARD

Luis argues that Due Process under the Fifth Amendment requires that an adequate hearing be held before the government restrains her assets. See Brief for Petitioner at 42.  Luis analogizes her inability to choose counsel to suppression of a person’s speech because she would not be able to have her case adequately represented by counsel of her choice, thus violating her rights. See id. at 48. Luis contends that the same standard of scrutiny should apply to the hearing to determine tainted assets as applied to other constitutional issues related to speech. See id. at 52. Therefore, Luis argues, the Government should be required to apply a standard of proof greater than probable cause during the hearing to determine whether the Government is likely to obtain a monetary judgment. See id. at 54.  Luis claims that the correct standard of proof is beyond a reasonable doubt, since that is the standard that will be applied to the criminal trial as well. See id. at 44.  

In opposition, the United States argues that the Government routinely removes particular defense counsel from the courtroom for a variety of reasons, such as conflict of interest. See Brief for Respondent at 50. Any action that removes counsel and their arguments, the United States claims, does not violate freedom of speech. See id. at 50. Therefore, the United States argues that Luis’ inability to hire counsel of her choice is similar to such a removal of counsel and does not violate the First Amendment. See id. The United States contends that Luis’ freedom of speech is not implicated because neither she nor her counsel will be restricted from speaking freely in her defense.  See id. Furthermore, the United State argues that a First Amendment argument does not bear on questions of procedure, such as the question of the applicable standard of proof in this case. See id. at 51.

Additionally, the United States argues that the probable cause standard of proof that already applies to directly forfeitable assets should also apply to “property of equivalent value” under § 1345. Id. at 46.  According to the United States, “the risk of error is no higher [with substitute assets] than when dealing with directly forfeitable assets.” Id. The United States further supports its position by relying on the cases United States v. Monsanto and Kaley v. United States to illustrate the use of the probable cause standard during § 1345 hearings. See id. at 48.

Discussion 

This case allows the Supreme Court to determine whether the Federal Government can constitutionally obtain a preliminary injunction to prevent a criminal defendant, facing fraud charges, from spending assets not obtained as a result of the fraud. See Brief for Petitioner, Sila Luis at i. Luis argues that restraining a criminal defendant’s untainted assets is a Constitutional violation that bars the defendant from hiring the attorney of her choice. See id. at 18–19. The United States asserts that such a restraint of a defendant’s assets is not unconstitutional if the Government can show that it has probable cause to believe that the assets are forfeitable. See Brief for Respondent, United States at 25–26. The Court’s decision could affect whether certain defendants, who are prohibited from spending their monetary assets during trial, will be able to hire a private attorney or will have to use the services of a public defender. See Brief of Amicus Curiae American Bar Association, in Support of Petitioner at 7. The decision will also assist in shaping forfeiture law in the United States. See Brief of Amici Curiae National Association of Criminal Defense Lawyers et al. ("NACDL"), in Support of Petitioner at 5–6.

THE FINANCIAL IMPACT ON DEFENDANT’S ABILITY TO HIRE COUNSEL OF CHOICE

The American Bar Association (“ABA”), in support of Luis, argues that a preliminary injunction restraining a defendant’s assets will prevent that defendant from hiring the defense attorney of her choice. See Brief of Amicus Curiae American Bar Association, in Support of Petitioner at 7. The ABA suggests that the inability to choose an attorney will affect whether and how the defendant is able to cooperate with the prosecution, agree to a plea bargain, or create a trial strategy. See id. The ABA also asserts that if a hired attorney must withdraw representation as a result of the defendant’s lack of assets, the defendant will need to restart the trial preparation process with a public defender who has no knowledge of the case and with whom the defendant has not established a relationship of confidence. See id. at 8. Additionally, the Cato Institute and the DKT Liberty Project contend that restraint of a defendant’s untainted assets runs counter to public interest in that it will result in taxpayers paying the bill for a public defender, rather than the defendant paying for her own attorney. See Brief of Amici Curiae Cato Institute and the DKT Liberty Project, in Support of Petitioner at 34.

The United States, however, maintains that the Government’s interest in completely recovering all forfeitable assets overrides a defendant’s interest in using those assets for an attorney.  See Brief for Respondent, United States at 28. The National Conference of State Legislatures (“NCSL”) claims that full recovery of all forfeitable assets benefits the public interest by disrupting criminal organizations that would otherwise be able to continue committing crimes with those assets. See Brief of Amici Curiae National Conference of State Legislatures et al., in Support of Respondent at 7. The United States further contends that a defendant will receive an undeserved financial reward if he or she is permitted to retain “untainted” assets for defense counsel after having spent all of the illegally obtained assets received from the crime. See id. at 36. The United States also argues that a privately hired attorney is not necessarily any more effective or trustworthy than the public defender that a defendant would be appointed if the Government restrains her assets.  See id. at 40–41.

ASSET FORFEITURE LAW IN THE UNITED STATES

The National Association of Criminal Defense Lawyers (“NACDL”) argues that the Government’s ability to use 18 U.S.C. § 1345 (“§ 1345”) to restrain untainted assets would result in an unintended expansion of criminal forfeiture law. See Brief of NACDL at 6. The NACDL asserts that Congress and the courts have purposefully limited the Government’s ability to restrain untainted assets because the Government would otherwise have the power to destroy businesses and livelihoods.  See id. at 16.

The NCSL counters by arguing that allowing a defendant to access forfeitable assets to pay for her criminal defense actually conflicts with the history and tradition of forfeiture law. See Brief of NCSL at 7. The NCSL also argues that forbidding the Government from restraining the defendant’s assets under § 1345 will prevent the states from protecting their citizens from crime and will inhibit the states’ efforts to create their own forfeiture laws. See id. at 9–10. In addition, the NCSL maintains that some criminals will be aware of the proposed distinction between tainted and untainted assets in U.S. forfeiture law and will therefore combine or spend the tainted assets so that they may later retain any untainted assets in a possible criminal trial. See id. at 12.

Conclusion 

In this case, the Court will determine whether a preliminary injunction under § 1345, preventing a defendant from spending untainted assets to retain counsel, violates the Fifth and Sixth Amendments. See Brief for Petitioner, Sila Luis at 1. Luis argues that the preliminary injunction violates the Sixth Amendment because Luis would be unable to use her untainted assets to adequately exercise her right to retain the counsel of her choice. See id. at 29.  Furthermore, according to Luis, the language of § 1345 does not allow the Government to restrain the spending of untainted assets. See id. at 23. Luis also argues that the pretrial § 1345 hearing should use a standard more rigorous than that of probable cause because of the potential constitutional implications that could result. See id. at 52. On the other hand, the United States argues that the Government has a right to enjoin forfeitable assets (which include both tainted and untainted assets) in order to ensure that a monetary judgment will be fulfilled, provided that the Government can show via probable cause that there will be a monetary judgment. See Brief for Respondent, United States at 46.

Edited by 

Acknowledgments