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High Court Eliminates Joint and Several Liability among Co-Conspirators

The Legal Intelligencer

On June 5, the U.S. Supreme Court handed down a decision that will impact sentencing in virtually every criminal case that involves multiple defendants (or multiple conspirators) and the imposition of an order of forfeiture. The decision will likely present opportunities for defendants who have already been sentenced to revisit the forfeiture judgments entered against them. The case, Honeycutt v. United States, examined "whether 21 U.S.C. Section 853(a)(1) mandates joint and several liability among co-conspirators for forfeiture of the reasonably foreseeable proceeds of a drug conspiracy." While Honeycutt dealt specifically with a drug conspiracy, the court's decision impacts defendants in any criminal case in which the district court has authority to order forfeiture because 18 U.S.C. Section 982, the general forfeiture provision, incorporates Section 853 by reference. Therefore, the court's decision regarding the joint and several liability of co-conspirators impacts nonnarcotics types of cases as well, such as those cases involving white-collar offenses such as wire fraud and program fraud. Honeycutt overturns precedent in the U.S. Court of Appeals for the Third Circuit, which had previously held that district courts must enter forfeiture judgments holding defendants jointly and severally liable for all of the foreseeable acts of the conspirators in United States v. Pitt, 193 F.3d 751, 765 (3d Cir. 1999) ("21 U.S.C. Section 853(a)(1) imposes joint and several liability with respect to forfeiture").

Prior to the Honeycutt decision, when a defendant was convicted of a crime where forfeiture was appropriate, courts were required to enter an order of forfeiture for "any property constituting, or derived from, any proceeds the person obtained, directly or indirectly, as the result of such violation." Until very recently, every court of appeals interpreted the language of Section 853(a)(1) in this way. This interpretation led to the imposition of joint and several liability for all defendants involved in a conspiracy, regardless of the role or the amounts actually obtained by a defendant. Because each defendant was required to repay a judgment for all property received by any co-conspirator, large forfeiture judgments were being entered against defendants whose role in a conspiracy was marginal and who received only a small portion of the conspiracy's proceeds.

In criminal cases, prior to Honeycutt, the district court would compute the amount of harm at sentencing and then enter a forfeiture order in the form of a personal money judgment against the defendant. The government could then collect on its forfeiture judgment as it could for any other judgment entered against a debtor of the United States. As a result, the government had the ability to recoup "untainted" assets to pay for the harm caused by the crime as identified by the forfeiture judgment.

To illustrate this problem, the Supreme Court provided an example of a farmer who masterminds a scheme to grow, harvest, and distribute marijuana on college campuses. The farmer recruits a college student to deliver the marijuana and pays the student $300 per month for his respective work. In one year, the farmer earns $3 million, while the student earns $3,600. If joint and several liability applied, as it did prior to Honeycutt, the student would face a forfeiture judgment for $3 million—the entire amount of the conspiracy's proceeds even though the student only received $3,600 as a result of his participation in the crime. After the judgment, was entered the government could then force the student to repay the additional $2,996,400 from other funds that had nothing whatsoever to do with the conspiracy to sell marijuana (i.e., he would have to pay the judgment with "untainted" assets).

In 2015, the D.C. Circuit recognized the unjust judgments that were being handed down as a result of Section 853. That court of appeals created a circuit split when it decided United States v. Cano-Flores, 796 F.3d 83, 90-95 (D.C. Cir. 2015), and held that Section 853(a)(1) did not mandate that a court enter a forfeiture order requiring a defendant to pay all of the proceeds of a conspiracy. The defendant in Cano-Flores was a midlevel member of a large Mexican drug cartel whose primary responsibilities were "transporting, storing, and distributing drugs in his territory, as well as accounting for the drugs and money that moved across the border." Despite Cano-Flores' relatively low role in the conspiracy, the district court entered a forfeiture order against him for $15 billion, the total proceeds received by the whole Mexican drug cartel. On appeal, the D.C. Circuit, bucking the uniform interpretation of Section 853(a)(1), reversed the forfeiture judgment. Its five-page analysis of Section 853 led to the conclusion that Cano-Flores could not be responsible for the entire amount of the cartel's proceeds.

The D.C. Circuit's analysis resonated with at least one judge on the Sixth Circuit who saw Honeycutt as an opportunity to overturn the precedent of joint and several liability that had been established in prior forfeiture cases. In Honeycutt, the defendant was convicted of a conspiracy to sell iodine-based water purification systems that could be used to manufacture methamphetamine. The defendant, a clerk with no access to any of the store’s bank accounts, was the brother of the man who owned and operated the business.  The district court reluctantly entered a forfeiture order against him in the amount of $69,751.98, which represented the total profits of the business—$269,751.98 less the $200,000 paid by the co-conspirator owner. On appeal, the Sixth Circuit affirmed the district court's order, but one dissenting judge called for rehearing en banc because she concluded that the D.C. Circuit's analysis was correct and the Sixth Circuit's prior decision on the subject was not. The Supreme Court subsequently granted certiorari.

Argument in Honeycutt was heard on March 29. In an 8-0 opinion, authored by Justice Sonia Sotomayor (Justice Neil Gorsuch took no part in the consideration or decision of the case), the Supreme Court reached the same conclusion as the D.C. Circuit. It held that "the plain text and structure of Section 853 leave no doubt that Congress did not, as the government claims, incorporate the principle that conspirators are legally responsible for each other's foreseeable actions in furtherance of their common plan." In other words, "the statute does not countenance joint and several liability."

The Supreme Court held that "Section 853(a) limits forfeiture to property flowing from ... the crime itself" overturning years of appellate precedent that permitted the government to satisfy judgments by forcing defendants to pay money or forfeit assets that were totally unrelated to the underlying offense. Using the marijuana farmer/college student example, the court stripped the government of the power to satisfy a $3 million judgment by disgorging $2,996,400 from the college student's untainted assets.

The Honeycutt decision will have a far-reaching impact, as it substantially limits the scope of criminal forfeitures. Moreover, changes in substantive law such as this can have retroactive effects. Defendants who have been sentenced under the prior interpretation of Section 853 may now have a right to relief. A defendant who has fully served his term of incarceration, or who seeks a purely financial modification to his sentence is likely only entitled to relief under a writ of coram nobis, as in Barnickel v. United States, 113 F.3d 704, 706 (7th Cir. 1997). Of particular note, in the Third Circuit in order to file a writ of coram nobis, the petitioner must no longer be "in custody"; must be attacking a conviction with "continuing penalties" or "collateral consequences" to the petitioner; and must seek to correct is a "fundamental error" for which "there was no remedy available at the time of trial and where 'sound reasons' exist for failing to seek relief earlier," as in United States v. Stoneman, 870 F.2d 102, 106 (3d Cir. 1989). Applying this test, a defendant who is subject to a forfeiture judgment based on joint and several liability would probably have a claim for coram nobis relief.

It is not clear how the courts will deal with these retrospective issues. However, it appears that coram nobis relief may provide an avenue for relief from joint and several liability forfeiture orders.

“High Court Eliminates Joint and Several Liability among Co-Conspirators,” by Jed M. Silversmith and Jeremy Kolman was published in The Legal Intelligencer on July 6, 2017. To view the article online, please click here.

Reprinted with permission from the July 6, 2017, edition of The Legal Intelligencer © 2017 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.