U.S. v. Kaley

• Decision Date: 18 August 2009
• Docket Number: No. 07-13010.,07-13010.
• Citation: 579 F.3d 1246
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Kerri L. KALEY, Brian P. Kaley, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

579 F.3d 1246

UNITED STATES of America, Plaintiff-Appellee, v. Kerri L. KALEY, Brian P. Kaley, Defendants-Appellants.

No. 07-13010.

United States Court of Appeals, Eleventh Circuit.

August 18, 2009.

G. Richard Strafer, G. Richard Strafer, P.A., Miami, FL, for Defendants-Appellants.

Madeleine R. Shirley, Anne R. Schultz, Miami, FL, for U.S.

Appeal from the United States District Court for the Southern District of Florida.

Before TJOFLAT, MARCUS and WILSON, Circuit Judges.

MARCUS, Circuit Judge:

In this case, a grand jury sitting in the United States District Court for the Southern District of Florida returned an indictment charging the defendants, Brian Kaley and Kerri Kaley, with conspiracy to transport stolen property, transportation of stolen property, obstruction of justice, and money laundering. The indictment also included a criminal forfeiture count. After the return of the indictment, the government, ex parte, obtained a protective order enjoining the Kaleys from encumbering the property listed in the forfeiture count. The Kaleys moved the district court to vacate the order so they could use the restrained assets to retain counsel of their choice, and they requested that the district court hold an evidentiary hearing to determine whether there was probable cause to believe that the property was forfeitable. The district court declined to hold a hearing and denied the motion to vacate the protective order. The Kaleys now appeal these rulings. After thorough review, we reverse and remand for further proceedings consistent with this opinion.

I.

In January 2005, Kerri Kaley, then a sales representative with Ethicon Endo-Surgery, was informed she was the target of a grand jury investigation in the Southern District of Florida. Kaley was suspected of stealing prescription medical devices ("PMDs") from hospitals and then selling them on the black market. Kaley retained Howard Srebnick of Black, Srebnick, Kornspan & Stumpf, P.A. as her counsel in the investigation. Kaley's husband, Brian Kaley, who was also under investigation was initially represented by Howard Srebnick and later retained a separate attorney, Susan Van Dusen, to avoid a potential conflict of interest. Together, the two attorneys informed the Kaleys that their legal fees to take the case through trial would be approximately $500,000. To obtain funds to pay those fees, the Kaleys applied for and obtained a home equity line of credit of $500,000 on their residence and used the proceeds to buy a certificate of deposit ("CD").

On February 6, 2007, the grand jury returned a seven-count indictment against the Kaleys.¹ Count One charged a conspiracy to transport PMDs in interstate commerce while knowing them to have been stolen, in violation of 18 U.S.C. § 371. Counts Two through Six charged five substantive § 2314 offenses,² and Count Seven charged obstruction of justice, in violation of 18 U.S.C. § 1512(b)(3). The indictment also sought criminal forfeiture of all property traceable to the § 2314 offenses, including the CD, and a money judgment in the amount of $2,195,635.28.³

On February 7, 2007, the Government moved the district court ex parte for a protective order restraining the Kaleys from transferring or otherwise disposing of the property listed in the forfeiture count, and a magistrate judge, concluding that the indictment established probable cause that the property was "traceable to" the Kaleys' commission of the § 2314 offenses, granted the motion the same day.⁴ The next day, the Government filed a notice of lis pendens against the Kaleys' residence.

On March 5, 2007, the Kaleys moved the district court to vacate the February 7th protective order. They contended that the order prevented them from retaining counsel of their choice in violation of their Sixth Amendment right to the representation of counsel. A magistrate judge heard this motion too on April 6th⁵ and sustained the protective order; however, he limited the protective order's scope (insofar as it applied to the CD) to $140,000.⁶

On April 10, 2007, the grand jury returned a superseding indictment. This indictment replicated the first seven counts of the first indictment and added an additional count—a charge that the Kaleys had conspired to launder the proceeds of the § 2314 offenses, in violation of 18 U.S.C. § 1956(h).⁷ This indictment also sought the criminal forfeiture of the CD and the Kaleys' residence on the theory that those assets were "involved in" the Kaleys' commission of the § 1956(h) offense.⁸ On April 17th, the Kaleys renewed their motion to vacate the February 7th protective order (as amended by the order of April 6th), and expressly requested a pretrial, post-restraint evidentiary hearing.⁹

The magistrate judge heard the motion on April 27th. He questioned whether the indictment alone provided probable cause to restrain the defendants' assets and ordered the prosecutor to submit an affidavit supporting probable cause. The prosecutor responded by filing, in secret and under seal, an affidavit executed by the FBI case agent.

On May 1, 2007, the magistrate judge issued two orders. In the first order, he found probable cause—based on the indictment and the case agent's affidavit—that the CD and the Kaleys' residence were "involved in" the violations of § 1956(h) and § 2314. In the second order, he amended the February 7th protective order to include within its scope the full value of the CD and the Kaleys' residence. On May 2nd, the magistrate judge issued a third order denying the Kaleys' motion to vacate the protective order and to hold a pretrial, post-restraint evidentiary hearing. In that order, the magistrate judge concluded that "no post-restraint hearing was necessary until trial."

On May 7, 2007, the Kaleys appealed the magistrate judge's May 1st and 2nd orders to the district court. On June 25th, the district court affirmed the magistrate judge's issuance of the protective order, concluding that the case agent's affidavit "demonstrated probable cause to believe that the Defendants' residence was `involved in' the money laundering offense charged in the superseding indictment, and that all but $63,007.65 of the funds used to obtain the CD were `traceable to' the residence." The trial court also affirmed the magistrate judge's denial of a pretrial evidentiary hearing, concluding that postponing the hearing until the trial itself satisfied due process. On June 27, 2007, the Kaleys lodged this interlocutory appeal, challenging the district court's decision.

II.

This Court has jurisdiction to entertain appeals of "[i]nterlocutory orders of the district courts ... granting, continuing, modifying, refusing, or dissolving injunctions." 28 U.S.C. § 1292(a)(1). Protective orders designed to preserve forfeitable assets, like the one in this case, qualify as injunctions for the jurisdictional purposes of § 1292(a)(1). United States v. Monsanto, 491 U.S. 600, 602-06, 109 S.Ct. 2657, 105 L.Ed.2d 512 (1989) (exercising interlocutory jurisdiction to review a pretrial restraining order, which was granted ex parte for the purpose of preserving forfeitable assets prior to forfeiture); Roberts v. United States, 141 F.3d 1468, 1471 (11th Cir.1998) (stating that denial of a motion to vacate a protective order over forfeitable assets would be reviewable as an interlocutory order in the appellate courts under § 1292(a)(1)). Such protective orders are like injunctions because they are "directed to a party, enforceable by contempt, and designed to accord or protect some or all of the substantive relief sought by the complaint in more than temporary fashion." 16 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3922, at 65 (2d. ed. 1996) (quotation marks omitted). We, therefore, review under § 1292(a)(1) the district court's order denying the Kaleys' motion to vacate the protective order and denying them a pretrial evidentiary hearing.

III.

With our jurisdiction settled, we address the main issue raised today: the Kaleys' argument that they have a due process right to a post-indictment, pretrial evidentiary hearing on the legality of the restraints on their property especially needed for the purpose of retaining counsel of their choice. In doing so, we are controlled by our decision in United States v. Bissell, 866 F.2d 1343 (11th Cir.1989). Bissell presented the same argument and this Court clearly held that a defendant whose assets are restrained pursuant to a criminal forfeiture charge in an indictment, rendering him unable to afford counsel of choice, is entitled to a pretrial hearing only if the balancing test enunciated in Barker v. Wingo, 407 U.S. 514, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1972), is satisfied. Id. at 1353. Thus, our task in this appeal is to decide whether the district court correctly interpreted and applied the Barker balancing test. After thorough review, we conclude that the district court incorrectly applied that test, and we, therefore, reverse and remand the case for further consideration consistent with this opinion.

In Bissell, a grand jury indicted each of the defendants with one or more of the following offenses: violating the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.; engaging in a Continuing Criminal Enterprise, 21 U.S.C. § 848; and conspiring to import cocaine, 21 U.S.C. § 846. Bissell, 866 F.2d at 1347. The indictment contained criminal forfeiture counts pursuant to 21 U.S.C. § 853, in which the grand jury alleged that all assets derived from, or devoted to, violations of federal narcotics laws were subject to forfeiture upon the defendants' convictions. Id. Following the return of the indictment, the Government seized the defendants' assets pursuant to a warrant it obtained from the district court ex parte pursuant to 21 U.S.C. § 853(f). Id. No pretrial, post-indictment motion was made to the district court contesting the legality of the...