USA. v. Farmer

• Decision Date: 29 October 2001
• Docket Number: No. 00-4580,00-4580
• Citation: 274 F.3d 800
• Parties: (4th Cir. 2001) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. WILLIAM HASKELL FARMER, Defendant-Appellant. Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 800

274 F.3d 800 (4th Cir. 2001)

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. WILLIAM HASKELL FARMER, Defendant-Appellant.

No. 00-4580

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Argued: October 29, 2001

Decided: December 12, 2001

Appeal from the United States District Court for the District of South Carolina, at Columbia. Dennis W. Shedd, District Judge. (CR-00-385) COUNSEL ARGUED: E. E. Edwards, III, Nashville, Tennessee, for Appellant. Marvin Jennings Caughman, Assistant United States Attorney, Columbia, South Carolina, for Appellee. ON BRIEF: C. Rauch Wise, Greenwood, South Carolina, for Appellant. Scott N. Schools, United States Attorney, Columbia, South Carolina, for Appellee.

Before WILKINSON, Chief Judge, GREGORY, Circuit Judge, and Malcolm J. HOWARD, United States District Judge for the Eastern District of North Carolina, sitting by designation.

Vacated and remanded by published opinion. Chief Judge Wilkinson wrote the opinion, in which Judge Gregory and Judge Howard joined.

OPINION

WILKINSON, Chief Judge:

Defendant William Farmer seeks a hearing to determine whether he is entitled to fund his criminal defense using some or all of the assets seized pursuant to civil forfeiture statutes prior to his indictment. The district court denied Farmer's request for a hearing. Because Farmer made a substantial showing that some of the seized assets may be both legitimate and necessary to hire an attorney, we vacate the judgment and remand with directions to hold a hearing for the limited purpose of determining whether untainted assets have been seized and whether Farmer requires those assets to hire counsel.

I.

On July 16, 1998, United States Customs Agents executed search warrants at Defendant William Farmer's residence and warehouse. These warrants were obtained upon a showing of probable cause that Farmer was engaged in illegal counterfeiting of clothing trademarks in violation of federal law. During these and subsequent searches, the agents seized, inter alia, numerous documents, ten motor vehicles, a big screen television, over 3,000 boxes of merchandise, $160,000 in cashier's checks, and more than $380,000 in cash pursuant to civil forfeiture statutes.

In August 1998, Farmer made a motion in the district court for the return of the seized property. The district court denied Farmer's motion without a hearing. In an attempt to trigger a civil forfeiture proceeding, Farmer then filed a claim and posted a $5,000 cost bond pursuant to 19 U.S.C. S 1608. Farmer also moved a second time for the return of the property. In August 1999, the district court denied Farmer's second motion, concluding that the government was proceeding diligently and that requiring it to return the seized property or institute a forfeiture action could interfere with the government's ongoing criminal investigation of Farmer. No civil forfeiture action was ever commenced.

On May 2, 2000, almost two years after the government seized Farmer's assets, a ten count indictment was handed down against Farmer. The indictment charged Farmer with, inter alia, conspiracy to traffic in clothing bearing counterfeit trademarks in violation of 18 U.S.C. S 371, conspiracy to engage in unlawful financial transactions in violation of 18 U.S.C. S 1956(h), and trafficking in counterfeit clothing and money laundering in violation of 18 U.S.C. SS 2320 and 1957. In addition, pursuant to 18 U.S.C. S 982, the indictment sought forfeiture of the property previously seized. The indictment indicated that the property was subject to forfeiture as either instruments or proceeds of Farmer's alleged trademark and money laundering violations.

On July 21, 2000, Farmer filed a motion for an immediate adversary hearing to determine if a portion of the seized funds should be released so that he could pay defense costs. Farmer alleged that the government seized all of his substantial assets in 1998, put him out of business in the process, and prevented him from using his own legitimate assets to fund his criminal defense. Farmer argued that he had a Sixth Amendment right to use his legitimate property to hire the attorney of his choice and that he had been deprived of that right without a meaningful opportunity to be heard in violation of the Due Process Clause. Farmer emphasized that the magistrate judge had concluded at arraignment that Farmer was entitled to appointed counsel because he was effectively rendered indigent by the government's seizure of his property. The magistrate reached this conclusion based on Farmer's affidavit and testimony under oath. Furthermore, Farmer argued that Customs officials had admitted that at least some of the merchandise seized was untainted. In response, the United States disputed that Farmer had no substantial assets with which to hire counsel. The government also stressed that Farmer had not challenged the probable cause determination underlying the search warrants used to seize his assets.

On August 10, 2000, the district court summarily denied Farmer's motion for an adversary hearing. Farmer appeals.¹

II.

The Supreme Court has made clear that a criminal defendant has no Sixth Amendment right to use illegally obtained funds to hire an attorney. In Caplin & Drysdale v. United States, 491 U.S. 617 (1989), the Court concluded that any Sixth Amendment right to obtain counsel of choice does not extend beyond the individual's right to spend his own legitimate, nonforfeitable assets. Caplin, 491 U.S. at 624-33. The Court explicitly rejected "any notion of a constitutional right to use the proceeds of crime to finance an expensive defense." Id. at 630, 109 S. Ct. 2646. And the Court stressed that "there is a strong governmental interest in obtaining full recovery of all forfeitable assets, an interest that overrides any Sixth Amendment interest in permitting criminals to use assets adjudged forfeitable to pay for their defense." Id. at 631, 109 S. Ct. 2646. Furthermore, in Caplin's companion case, the Court held that the pretrial restraint of a criminal defendant's assets does not violate the Constitution as long as the assets are restrained based upon a finding of probable cause that they are subject to forfeiture. United States v Monsanto, 491 U.S. 600, 615-16 (1989).

However, Caplin and Monsanto expressly left open the issue of whether a defendant has a Fifth Amendment right to a pretrial hearing to determine whether some or all of the seized assets may properly be used to fund his criminal defense. In Monsanto, the Supreme Court stated:

We do not consider today, however, whether the Due Process Clause requires a hearing before a pretrial restraining order can be imposed. . . .

Though the United States petitioned for review of the Second Circuit's holding that such a hearing was required, . . . given that the Government prevailed in the District Court notwithstanding the hearing, it would be pointless for us now to consider whether a hearing was required by the Due Process Clause.

Monsanto, 491 U.S. at 615 n.10.

Prior to Caplin and Monsanto, this court addressed a criminal defendant's due process right to a hearing when his assets are seized pursuant to criminal forfeiture statutes. In United States v. Harvey, 814 F.2d 905 (4th Cir. 1987), we stated that "the issuance of ex parte restraining orders after indictment without any post-deprivation hearing other than a criminal trial . . . violates fifth amendment due process guarantees" when all of a defendant's substantial assets have been restrained and the defendant seeks to utilize restrained assets to fund his legal defense. Harvey, 814 F.2d at 913, 928-29.²

Our sister circuits have agreed with the conclusion in Harvey. They have held that due process requires a pretrial adversary hearing when a defendant claims that a portion of the assets restrained pursuant to criminal forfeiture statues are untainted and that he has no other funds from which to secure the counsel of his choice. See, e.g., United States v. Jones, 160 F.3d 641, 645-49 (10th Cir. 1998); United States v. Monsanto, 924 F.2d 1186, 1191-98 (2d Cir. 1991) ("Monsanto IV"); United States v. Moya-Gomez, 860 F.2d 706, 725-30 (7th Cir. 1988); United States v. Lewis, 759 F.2d 1316, 1324-25 (8th Cir. 1985); United States v. Crozier, 777 F.2d 1376, 1383-84 (9th Cir. 1985); United States v. Long, 654 F.2d 911, 915-16 (3d Cir. 1981). But see United States v. Register, 182 F.3d 820, 835 (11th Cir. 1999) (recognizing that the Eleventh Circuit is the "only circuit holding that, although pre-trial restraint of assets needed to retain counsel implicates the Due Process Clause, the trial itself satisfies this requirement"). At least one circuit has also concluded that due process requires an adversary hearing on probable cause "when the district court has found that the government has seized through civil forfeiture all of the assets a criminal defendant needs to obtain counsel." United States v. Michelle's Lounge, 39 F.3d 684, 700-01 (7th Cir. 1994).

III.

Due process requires that a person not be deprived of property without notice and an opportunity for a hearing "at a meaningful time and in a meaningful manner." Fuentes v. Shevin, 407 U.S. 67, 80 (1972) (internal quotation omitted). When identifying the specific dictates of due process, three factors must be considered: (1) "the private interest that will be affected by the official action;" (2) "the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards;" and (3) "the Government's interest, including the . . . administrative burdens that the additional or substitute procedural requirement would entail." Mathews v. Eldridge, 424 U.S. 319, 33435 (1976). Courts have consistently used this Mathews analysis to determine if a defendant is entitled to a postseizure, pretrial adversary hearing. See, e.g., Harvey, 814 F.2d at 928; Jones, 160...