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Kaley v. United States, USSC 12-464, cert granted 3/18/13

Question presented:

When a post-indictment, ex parte restraining order freezes assets needed by a criminal defendant to retain counsel of choice, do the Fifth and Sixth Amendments require a pretrial, adversarial hearing at which the defendant may challenge the evidentiary support and legal theory of the underlying charges?

Lower court decision: United States v. Kaley, 677 F.3d 1316 (11th Cir. 2012)


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The issue of pretrial orders under the federal property forfeiture statute that freeze a defendant’s assets–and thereby impair (or destroy) the defendant’s ability to hire counsel of choice–obviously makes this case of interest to attorneys retained to defend federal criminal charges. While Wisconsin’s property forfeiture statutes do not have language like the federal statute, the constitutional issues could arise under state law, so the decision in this case could prove important to lawyers hired to defendant state criminal defendants as well.

As explained in the Court’s statement of the question presented, 18 U.S.C. § 853(e) authorizes a district court, upon an ex parte motion of the government, to restrain an indicted defendant’s assets that are subject to forfeiture upon conviction. The statute does not provide for a post-restraint, pretrial adversarial hearing at which the indicted defendant may challenge the propriety of the restraints. In United States v. Monsanto, 491 U.S. 600 (1989), the Court rejected a Fifth and Sixth Amendment challenge to the restraint of an indicted defendant’s assets needed to pay counsel of choice, but explicitly left open the question “whether the Due Process Clause requires a hearing before a pretrial restraining order can be imposed.” Id. at 615 n.10. Even before Monsanto the federal circuit courts divided on the need for, and the scope of, a hearing on the pretrial restraining order, and cases since then have firmly entrenched a split among the eleven circuits that have addressed it. The Seventh Circuit is among those holding 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). By contrast, in the  case under review the defendants demanded a hearing to challenge the probable cause determination, but the Eleventh Circuit held the hearing was limited to whether the restrained assets were traceable to or involved in the conduct charged in the indictment. The decision in this case will resolve the split in the circuits, and if the Court affirms the Eleventh Circuit the practice in this circuit will change.

As to Wisconsin law, no published case addresses Monsanto in particular or a court’s pretrial power to freeze assets in general. Nor do our property forfeiture statutes—Wis. Stat. §§ 946.86 and 946.87, §§ 961.55 and 961.555, and §§ 973.075 and 973.076—have an exact parallel to the restraining order provision under federal law. 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 till 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 any of these statutes might be used to freeze a criminal defendant’s assets before trial, the Court’s decision in Kaley will define the minimum process due a defendant before such a freeze can be ordered.

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