On March 30, 2016, the U.S. Supreme Court held that the Sixth Amendment to the United States Constitution guarantees a defendant's right to access his or her funds that are untainted by any criminal conduct to pay for counsel. In Luis v. United States, 578 U.S. ___ (2016), the Supreme Court substantially limited the government's ability to freeze a defendant's "innocent" or "untainted" assets prior to conviction.
The decision means significant changes for criminal defendants, particularly in white-collar prosecutions. Under the Supreme Court's prior case law, a defendant had no right to use "tainted" assets (those directly received from or traceable to the charged crime) that had been seized by the government to pay for defense counsel. See Caplin & Drysdale, Chartered v. United States, 491 U.S. 617 (1989) and United States v. Monsanto, 491 U.S. 600 (1989). Congress subsequently extended the government's ability to restrain a defendant's untainted assets in cases involving bank and healthcare fraud to the "equivalent value" of the defendant's illegal profit. 18 U.S.C. § 1345(a)(2).
The impact of this law meant that the government could restrain the "untainted" or "innocent" assets (those with no connection to the charged crime) in an amount sufficient to cover what the government believed it would obtain after conviction through restitution or forfeiture orders. The amount frozen by the government could equal a significant portion or even the entirety of an accused's net worth, leaving him or her without resources to hire counsel of choice. A defendant then would be compelled either to locate counsel that would defer payment of legal fees in the hope that their fees could be recovered following an acquittal, or to borrow large sums from family and friends. Failing that, a defendant would be compelled to seek counsel appointed by the court either from the Federal Defenders or the Criminal Justice Act panel, often leaving defendants with attorneys who were overworked, underpaid and ill-equipped to deal with complex, document-intensive cases.
Luis was charged with healthcare fraud. Both the District Court and the Court of Appeals for the Eleventh Circuit ruled against Luis' attempts to get funds released so she could hire an attorney. The Supreme Court reversed the Eleventh Circuit in a plurality opinion written by Justice Breyer. That Court reasoned that the Sixth Amendment right to counsel of choice was greater than the government's potential right to recover substitute assets in the event of a conviction. Justice Thomas concurred in the judgment, writing that the right to counsel was so fundamental that the government had no right to freeze untainted assets prior to conviction at all.
Thus, a defendant in a criminal case remains free to use his or her untainted or "innocent" assets to retain counsel. The ability to retain top-notch counsel often is the key difference in successfully defending criminal charges.
Luis leaves many questions unanswered that will likely be the subject of extensive litigation in the next few years. For example, the decision states that a defendant has a right to "a reasonable fee for the assistance of counsel," suggesting that there is not an absolute right to counsel of the defendant's choice. The Court does not define "reasonable fee," and it remains to be seen how lower courts will apply that language. Furthermore, while the lower courts will apply the current law on tracing tainted assets, questions as to how those rules will apply with pre-trial seizures remain, such as how a mix of tainted and untainted assets will be handled.
Regardless of the open questions, the U.S. Supreme Court's decision has strengthened the rights of criminal defendants to obtain counsel of their choice. With access to their own funds to pay private attorneys, criminal defendants can anticipate their options for representation to increase. Justice Thomas' concurrence and a dissent from Justice Kagan appear to suggest that at least some voices on the Court would be receptive to an argument that pre-trial seizure of untainted assets is unconstitutional across the board. Thus, further challenges to the forfeiture laws can be anticipated in the near future.
If you have any questions about this Alert, please contact George D. Niespolo, William B. Pollard III, Marvin G. Pickholz, Eric R. Breslin, Melissa S. Geller, Amanda Bassen, any of the attorneys in our White-Collar Criminal Defense, Corporate Investigations and Regulatory Compliance Practice Group or the attorney in the firm with whom you are regularly in contact.
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