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SCOTUS: No right to contest grand jury’s probable cause determination when challenging pre-trial freeze of assets

Kaley v. United States, USSC 12-464, 2/25/14

United States Supreme Court decision, affirming United States v. Kaley, 677 F.3d 1316 (11th Cir. 2012)

In a 6-to-3 decision, the Supreme Court holds that when a post-indictment, ex parte restraining order under 18 U.S.C. § 853(e) freezes assets that are potentially subject to forfeiture but which the defendant needs to retain counsel, the defendant is not entitled to a pretrial hearing to challenge whether there is probable cause for the underlying charges. The decision changes the rule in the Seventh Circuit, which has long held that due process requires a pretrial hearing where the defendant may test probable cause as to both the predicate offense and the forfeitability of the property. United States v. Michelle’s Lounge, 39 F.3d 684 (7th Cir. 1994).

Federal forfeiture law authorizes a district court, upon an ex parte motion of the government, to freeze assets of an indicted defendant that are subject to forfeiture upon conviction. In Caplin & Drysdale, Chartered v. United  States, 491 U.S. 617 (1989), and United States v. Monsanto, 491 U.S. 600 (1989), the Court rejected a Fifth and Sixth Amendment challenge to the freezing of an indicted defendant’s assets needed to pay counsel of choice. While Monsanto held that a freeze order must be based on probable cause to believe both that the defendant committed an offense permitting forfeiture and that the property at issue has a connection the crime, it explicitly left open the question whether there is a due process right to a hearing before a pretrial restraining order can be imposed. Id. at 615 n.10. Since Monsanto most federal courts have permitted hearings on the connection-to-the-crime issue, but have divided on whether the defendant can challenge the probable cause underlying the charges. The Court now holds that the grand jury’s determination of probable cause is the last and inviolable word on the matter:

If judicial review of the grand jury’s probable cause determination is not warranted (as we have so often held) to put a defendant on trial or place her in custody, then neither is it needed to freeze her property. The grand jury that is good enough—reliable enough, protective enough—to inflict those other grave consequences through its probable cause findings must needs be adequate to impose this one too. Indeed, Monsanto already noted the absence of any reason to hold property seizures to different rules: As described earlier, the Court partly based its adoption of the probable cause standard on the incongruity of subjecting an asset freeze to any stricter requirements than apply to an arrest or ensuing detention….

And indeed, the alternative rule the Kaleys seek would have strange and destructive consequences. The Kaleys here demand a do-over, except with a different referee. They wish a judge to decide anew the exact question the grand jury has already answered—whether there is probable cause to think the Kaleys committed the crimes charged. But suppose the judge performed that task and came to the opposite conclusion. Two inconsistent findings would then govern different aspects of one criminal proceeding: Probable cause would exist to bring the Kaleys to trial (and, if otherwise appropriate, hold them in prison), but not to restrain their property. And assuming the prosecutor continued to press the charges,.. the same judge who found probable cause lacking would preside over a trial premised on its presence. That legal dissonance, if sustainable at all, could not but undermine the criminal justice system’s integrity—and especially the grand jury’s integral, constitutionally prescribed role. (Slip op. at 9-11).

The Court also rejects the Kaleys argument that they would prevail if the Court used the balancing test outlined in Mathews v. Eldridge, 424 U.S. 319 (1976), to determine whether they had an adequate opportunity to challenge the asset freeze. Even if that test applied, the majority concludes the Kaleys would still not be entitled to a hearing to challenge the grand jury’s probable cause determination because while the Kaleys’ constitutional right to retain their lawyer of choice is a “vital interest at stake,” under Monsanto “an asset freeze depriving a defendant of that interest is erroneous only when unsupported by a finding of probable cause”–an easy standard to meet. (Slip op. at 12-18).

A vigorous dissent by Chief Justice Roberts, joined (incongruously) by Justices Breyer and Sotomayor, criticizes the consequences of the majority decision because it may allow a prosecutor to charge a defendant and then “hamstring his target by preventing him from paying his counsel of choice….” (Dissent at 5). It also criticizes the majority’s “legal dissonance” concerns, noting that judges now consider evidence beyond that presented to the grand jury in making bail decisions, and points out that the practical concerns about addressing probable cause in a challenge to a freeze order have not been borne out in the circuits that have allowed such hearings. (Dissent at 8-9, 12-16). And the dissent’s peroration sounds like it was written by a long-time defense lawyer:

…. A person accused by the United States of committing a crime is presumed innocent until proven guilty beyond a reasonable doubt. But he faces a foe of powerful might and vast resources, intent on seeing him behind bars. That individual has the right to choose the advocate he believes will most ably defend his liberty at trial.

….

Federal prosecutors, when they rise in court, represent the people of the United States. But so do defense lawyers—one at a time. In my view, the Court’s opinion pays insufficient respect to the importance of an independent bar as a check on prosecutorial abuse and government overreaching. Granting the Government the power to take away a defendant’s chosen advocate strikes at the heart of that significant role. … (Dissent at 17, 18).

While this decision undoes the long-standing practice of the Seventh Circuit, what about state law? As we noted in our post on the cert grant, no published Wisconsin case addresses a court’s pretrial power to freeze assets, and our property forfeiture statutes—Wis. Stat. §§ 946.86 and 946.87, §§ 961.55 and 961.555, and §§ 973.075 and 973.076—don’t have an exact parallel to the federal law at issue in this case. Moreover, the forfeiture provisions of §§ 946.86 and 946.87 appear to apply only after conviction under § 946.83 (racketeering activity) or §946.85 (running a continuing criminal enterprise), though the civil remedies under § 946.87 allow for certain injunctions, including requiring the defendant to divest property involved in racketeering activity or running a continuing criminal enterprise. Both §§ 961.555(2)(a) and 973.076(2)(a) allow for forfeiture proceedings to be adjourned until adjudication of the criminal case, but under §§ 961.55(4) and 973.075(3) the property is subject to the “orders and decrees of the court having jurisdiction over the forfeiture proceedings.” To the extent such “orders or decrees” might be used to freeze a criminal defendant’s assets before trial, the Court’s decision here suggests the defendant has no right to challenge anything other than whether the assets are the fruits of the alleged criminal activity.

UPDATE (3/2/14): Over at The Atlantic, Andrew Cohen explains why the Chief Justice’s dissent is “such a backhanded defense of the right to counsel that it’s barely a defense at all.”

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