U.S. v. Schwimmer
| Decision Date | 13 July 1992 |
| Docket Number | 1317,D,Nos. 972,s. 972 |
| Citation | 968 F.2d 1570 |
| Parties | UNITED STATES of America, Appellee, Sheet Metal Workers Local 38 and International Brotherhood of Teamsters Local 810, Intervenor-Appellees, v. Martin SCHWIMMER, Defendant, Dershowitz & Eiger, Appellant. ockets 91-1629, 91-1738. Second Circuit |
| Court | U.S. Court of Appeals — Second Circuit |
Jody Kasten, Asst. U.S. Atty., New York City (Andrew J. Maloney, U.S. Atty., E.D.N.Y., Robert L. Begleiter, Varuni Nelson, M. Lawrence Noyer, Jr., Asst. U.S. Attys., on the briefs), for appellee U.S.
Deborah Hunt Devan, Baltimore, Md. (Weinberg and Green, Baltimore, Md., Sidney L. Meyer, Attorney at Law, New York City, on the briefs), for intervening appellees Sheet Metal Workers Local 38 and Intern. Brotherhood of Teamsters Local 810.
Nathan Z. Dershowitz, New York City (Victoria B. Eiger, Dershowitz & Eiger, P.C., on the briefs), for appellant Dershowitz & Eiger, P.C.
Before: NEWMAN, CARDAMONE, Circuit Judges, and WOOD, District Judge. 1
This case concerns the payment of attorneys fees to Dershowitz & Eiger, P.C. ("D & E"), counsel for Defendant Martin Schwimmer in appellate criminal proceedings. The appeal results from the Hon. Arthur D. Spatt's September 30, 1991 refusal to approve a stipulation between Martin Schwimmer and the Government permitting Martin Schwimmer to withdraw $55,000 from a court-controlled bank account in order to pay D & E attorneys fees. The District Court denied a motion to reconsider that decision on December 10, 1991. D & E now appeals the September 30 and December 10 decisions. For the reasons stated below, we remand this case to the District Court.
Martin Schwimmer was convicted in October of 1988 on racketeering charges in the Eastern District of New York, the Hon. Joseph McLaughlin presiding. See United States v. Schwimmer, 924 F.2d 443 (2d Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 55, 116 L.Ed.2d 31 (1991). In lieu of a jury trial on the Government's forfeiture charges against Schwimmer pursuant to 18 U.S.C. § 1963, Schwimmer and the Government entered into a "RICO Forfeiture Settlement Agreement" on February 14, 1989. In that agreement, Schwimmer agreed that he was indebted to the Government in the amount of $4.5 million. In order to satisfy this obligation, he is required to use all of his cash and assets (which were listed in a schedule appended to the agreement), with the exception of a house and car, and with the exception of $100,000 to pay bona fide attorneys fees. The agreement provided that if liquidation of these assets fell short of the $4.5 million, Schwimmer would remain personally liable for the shortfall. The agreement also required Schwimmer to deliver certain security instruments and other documents to the Government, and to deliver certain gems and motor vehicles to Government-approved auctioneers.
Two other clauses of the Agreement are particularly relevant. One clause states: "[t]his document contains the entire agreement between the parties concerning the subject matter hereof and may not be changed or terminated except by a writing signed by the party against whom enforcement of such change or termination is sought." Another clause states that in the event of reversal on appeal, the agreement shall be void and all cash and assets delivered to the Government shall be returned.
Judge McLaughlin approved the agreement. He also stated, in sentencing Schwimmer, that he was ordering the forfeiture of $4.5 million in accordance with the forfeiture agreement.
On March 14, 1989, the Attorney General published the RICO Forfeiture Settlement Agreement, pursuant to § 1963(l )(1). On March 17, 1989, Judge McLaughlin ordered the Clerk of the Court to open a bank account to receive money paid by the defendant pending adjudication of third-party petitions to amend the order of forfeiture, and pending liquidation of Schwimmer's assets.
In April of 1989, D & E met with the Government regarding attorneys fees. Schwimmer had previously been represented by the firm Kostelanetz, Ritholtz, Tigue & Fink as trial counsel, but he sought representation by Alan Dershowitz and D & E as appellate counsel. Because the $100,000 exempted in the forfeiture order was for trial counsel, D & E wished to reach an arrangement regarding payment for partially performed and future services on appeal. Both the Government and D & E confirm that an oral agreement was reached at that time ("the April agreement"). In D & E's words, "instead of Mr. Schwimmer simply paying counsel, since all his liquid assets were now in a court controlled bank account, it was agreed that any further legal fees would be negotiated between Mr. Schwimmer and his counsel, the government would review the fees Mr. Schwimmer and his counsel had agreed on, and the fees would then be presented to the Court for approval."
In July of 1989, Judge McLaughlin considered a petition by the International Brotherhood of Teamsters Local 810 ("Local 810") and the Sheet Metal Workers Local 38 ("Local 38") (collectively, "the Unions"). The Unions petitioned the Court to amend the February 14, 1989 Agreement so that the $4.5 million would be paid to them, not to the Government. The petition was pursuant to 18 U.S.C. § 1963(l )(6), which states (in pertinent part) that a court shall amend the order of forfeiture if the court has determined by a preponderance of the evidence that:
(A) the petitioner has a legal right, title, or interest in the property, and such right, title, or interest renders the order of forfeiture invalid in whole or in part because the right, title, or interest was vested in the petitioner rather than the defendant or was superior to any right, title, or interest of the defendant at the time of the commission of the acts which In an Order of July 24, 1989 Judge McLaughlin granted the Unions' petitions. United States v. Schwimmer, No. 87 Cr. 423, Order (E.D.N.Y. July 24, 1989) [hereinafter "July Order"]. He found that Schwimmer held certain commissions as a constructive trust for the Unions. July Order at 5. As a result of this finding, and the finding that the Unions lost approximately $16 million to Schwimmer and his co-defendant, Mario Renda, Judge McLaughlin concluded that the Unions were entitled to the entire $4.5 million originally forfeited to the Government. July Order at 7. He found that Local 810 was entitled to $3,428,534 and that Local 38 was entitled to $1,071,466, and stated that the Order of Forfeiture was amended to reflect the remission of those respective amounts.
gave rise to the forfeiture of the property under this section....
Work on Schwimmer's appeals continued with D & E representing him. In October 1989, notwithstanding the July Order, D & E and the Government entered into a stipulation permitting D & E to be paid $25,000 from proceeds from the sale of jewelry. The stipulation was prepared at the behest of Judge McLaughlin's law clerk, and was "So Ordered" by Judge McLaughlin. A similar procedure was repeated three times, through September of 1990. The Unions were not given notice of any of these stipulations.
A fifth stipulation providing for payment of up to $55,000 was prepared in the Spring of 1991. The stipulation stated:
... notwithstanding the RICO forfeiture agreement and order ... of February 14, 1989, and entered that day as an order of the Court and without violating that order, Martin Schwimmer may pay bona fide attorneys fees and costs, not to exceed $55,000.... Payment ... may be made from any sums referred to in the order dated February 14, 1989, and otherwise forfeitable to the government.
The Unions learned of this latest stipulation and objected. By this time, the case had been reassigned to Judge Spatt. In a September 30, 1991 decision, Judge Spatt declined to approve this stipulation, on the ground that the July 1989 order of remission had divested the Defendant and the Government of any right, title, or interest in the funds, and therefore neither party had any right to control its disposition. D & E appealed this decision. D & E subsequently moved the District Court to reconsider. The District Court denied that motion, and D & E also appealed the denial of the motion for reconsideration. 2
The RICO criminal forfeiture statute has caused alarm in a number of quarters, but two groups have felt particularly vulnerable to this law: defense attorneys, who risk non-payment if their clients' funds are found subject to forfeiture, and third-party property holders, who risk losing their property to the Government if their property appears to be the defendant's and the defendant is ordered to forfeit that property to the Government. The case before us presents a dispute between members of those groups.
Although the Supreme Court held in Monsanto and Caplin & Drysdale that the forfeiture of funds for attorneys fees does not violate the Sixth Amendment right to counsel, United States v. Monsanto, 491 U.S. 600, 109 S.Ct. 2657, 105 L.Ed.2d 512 (1989); Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 109 S.Ct. 2646, 105 L.Ed.2d 528 (1989), the Attorney General has the authority under 18 U.S.C. § 1963(g)(2) to permit defendants to keep some assets otherwise forfeitable to the Government, in order to pay their attorneys. With respect to the rights of third-party property holders, § 1963(g) permits those parties to petition the Attorney General for remission of property, and § 1963(l ) permits a narrow class of interest holders to petition a Court to amend an order of forfeiture so that their property may be returned directly to them. The Following our preliminary analysis of jurisdiction, our review of this decision has three parts: first, we ask whether the District Court's analysis of D & E's rights was correct, assuming, arguendo, that the July Order was binding with respect to D & E. See II, infra. We answer this question affirmatively, and...
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