Stacy v. United States

• Court: U.S. District Court — Northern District of Illinois
• Writing for the Court: MATTHEW F. KENNELLY, UNITED STATES DISTRICT JUDGE
• Docket Number: 19 C 301
• Decision Date: 21 March 2022
• Citation: Stacy v. United States, 19 C 301 (N.D. Ill. Mar 21, 2022)
• Parties: ANDREW STACY, Plaintiff, v. UNITED STATES OF AMERICA, Defendant.

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ANDREW STACY, Plaintiff, v. UNITED STATES OF AMERICA, Defendant.

No. 19 C 301

United States District Court, N.D. Illinois, Eastern Division

March 21, 2022

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, UNITED STATES DISTRICT JUDGE

In December 2014, Andrew Stacy pled guilty to one count of bank fraud and was ordered to pay restitution to the victims of the crime in the amount of $1, 495, 689.60. The United States registered the judgment with the Treasury Offset Program, a Department of Treasury program that helps collect delinquent debts owed to federal agencies. Under the program, the U.S Treasury withholds funds that would otherwise be paid to an individual by a federal agency and instead applies the funds as a credit to the individual's federal debts.

Following his two-year incarceration, Stacy sued the United States under the Federal Tort Claims Act (FTCA), alleging that Bureau of Prisons employees were negligent in failing to timely approve and perform needed medical treatment. The parties settled the case for $70, 000. During settlement negotiations, the United States indicated that the settlement was subject to administrative offset and that, instead of paying it out to Stacy, it would apply the proceeds to his criminal restitution debts.

Evidently this was not known to either side's counsel throughout the litigation until a settlement had been concluded. This is truly unfortunate, as earlier awareness of this important information might have saved a lot of the parties' time and effort.

Stacy has filed a motion asking the Court to find that his FTCA suit settlement is not subject to an administrative offset. For the reasons stated below, the Court denies Stacy's motion.

Discussion

The Court first addresses its jurisdiction to rule on this issue. A party may sue the United States only in cases where Congress has waived its sovereign immunity. The FTCA provides one such waiver, allowing the United States to be held liable "under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred." 28 U.S.C. § 1346(b)(1). This waiver is what allowed Stacy to bring his tort suit against the government. But, with respect to his current motion, the government contends that the FTCA does not authorize suits against "the United States to enjoin an administrative offset" and thus that the Court lacks jurisdiction to address Stacy's request. Resp. at 3.

The Court disagrees. Section 1346(c) states that the jurisdiction conferred by the FTCA "includes jurisdiction of any set-off, counterclaim, or other claim or demand whatever on the part of the United States against any plaintiff commencing an action under" the FTCA. 28 U.S.C. § 1346(c) (emphasis added). This section contrary to the government's contention, is written broadly and includes all cases, like this case, where the United States claims a set-off against an FTCA plaintiff. See Johnson v. United States, No. 13 C 2839, 2018 WL 5919475, at *1-2 (N.D. Ill. Nov. 7, 2018).

Having determined that it has jurisdiction to address Stacy's motion, the Court proceeds to do so. Under 31 U.S.C. § 3728(a), the Treasury "shall withhold paying that part of a judgment against the United States Government presented to the [Treasury] that is equal to a debt the plaintiff owes the Government." Additionally, sections 3711 and 3716 state that, "with respect to claims of the United States for money or property arising out of the activities of, or referred to, the agency," "the head of an executive, judicial, or legislative agency may collect the claim by administrative offset." 31 U.S.C. §§ 3711(a), 3716(a). These statutory provisions suggest that the government has the authority to assert an offset against a party who owes criminal restitution.

Stacy argues that these statutory provisions do not apply for several reasons. First, Stacy argues that his criminal restitution is not a "debt that [he] owes the Government"; rather, he contends, he owes restitution to the victims of his crime. But Stacy does not cite any authority for his contention, and cases from other circuits undermine his argument. For example, the Eighth Circuit has held that "[a]n order of restitution . . . is based on the victim's losses, but it is an obligation owed to the government." United States v. Whitbeck, 869 F.3d 618, 620 (8th Cir. 2017). Similarly, an Eastern District of Arkansas court, in rejecting the very argument that Stacy makes, found that the plaintiff's restitution debt was owed to the government. Simpson-El v. United States No. 2:12-cv-00004-SWW, 2015 U.S. Dist. LEXIS 160789, at *4 (E.D. Ark. Dec. 1, 2015). Although restitution is for the benefit of the crime victims, it is payable to the government, which collects the payment and then distributes it to the victims. For these reasons, the Court finds that Stacy's restitution is a debt owed to the government.

Second Stacy argues that the sections do not apply because he is current on his restitution payments. He compares his situation to that of the plaintiff in Simpson-El. In that case, the court found that the plaintiff's debt was not past due, noting that:

The restitution schedule provided for "[p]ayment of not less than 10% of the funds deposited each month into the inmate's trust fund account and monthly installments of not less than 5% of the defendant's monthly gross household income over a period of 3 years, to commence 30 days after release from imprisonment to a term of supervision."

Id. at *6. Because the plaintiff was current on his payments, the court concluded that administrative offset was not appropriate. In a similar case, the D.C. Circuit held that an administrative offset was not available where the plaintiff was not delinquent in her restitution obligations. United States v. Hughes, 813 F.3d 1007, 1011 (D.C. Cir. 2016).

In contrast, the government argues that this case is like Johnson, in which the court found that the plaintiff's restitution was due immediately and thus the debt was delinquent. Johnson, 2018 WL 5919475, at *3. Most significantly with respect to the question before the Court in Stacy's case, the court in Johnson relied upon the fact that the restitution judgment stated that the amounts were "due immediately." Id. For these reasons, the court held that the plaintiff's settlement was subject to offset by the government.

Stacy's case is similar to Johnson. The judge in his criminal case entered a judgment stating that that his monetary penalties were "due immediately." Dkt. no. 90-1 at 7. The court reiterated this in the "special instructions" section of the order, stating that "[t]he financial obligations are due immediately from any non-exempt assets." Id. Although the court provided Stacy with a payment plan, that simply provided a schedule for payment in the event that he could not make the entire payment in full. This is clear from the court's use of the phrases "Otherwise" and "Any balance remaining upon release. . . ." See Id. Nothing in the court's language suggests that the payment plan superseded his obligation to pay restitution "immediately." See id.

Next, Stacy contends that, under the government's interpretation, "every single inmate [who owes restitution] would be deprived of the right to an attorney to represent them in their cases" because any potential settlement or judgment from such cases would be used to pay down the restitution amount, instead of attorney's fees or court costs. Mem. at 4. Stacy further argues that this lack of recourse would allow prison staff to "mistreat, abuse, neglect, and otherwise ignore" inmates with restitution judgments "without regard for the repercussions." Id. This is a serious and plausible argument. Unfortunately, however, the Court lacks the authority to ignore or rewrite the statute to take Stacy's point into account. If a statute represents bad policy, it is up to Congress, not the courts, to change it. See Nat'l Fed'n of Indep. Bus. v. Sebelius, 567 U.S. 519, 538 (2012). The Court also notes that a federal prisoner in this situation likely has an available remedy for injunctive relief to prevent ongoing violations of his constitutional rights. See McCarty v. Pitzer, No. 96-2301, 1997 WL 225869, at *3 (7th Cir. Apr. 30, 1997) (unpublished).

Lastly Stacy argues that the statutes cited by the government do not apply to cases involving criminal restitution because "[c]riminal restitution is governed by 18 U.S.C. § 3664, which allows the Court, and not any administrative agency, to control criminal restitution." Reply at 3. Stacy contends that the government's interpretation gives the Treasury the power to "amend, alter, compromise, or discharge the restitution debt owed by Plaintiff," which, he contends, is in direct violation of 18 U.S.C. § 3664(c). Id. at 4. But 18 U.S.C. § 3664 does not prohibit the government from collecting criminal restitution through administrative offset. In fact, the provision states that "[a...