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United States v. Michelle's Lounge

October 3, 1997






Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 91 C 5783 -- Blanche M. Manning, Judge.

Before Cudahy, Eschbach and Flaum, Circuit Judges.

Cudahy, Circuit Judge.

Argued May 28, 1997

Decided October 3, 1997

This court is called upon again to consider the guarantees of due process for defendants in criminal and civil forfeiture cases. The path to this case began with United States v. Moya-Gomez, 860 F.2d 706 (7th Cir. 1988). There the government froze the assets of a criminal defendant with an ex parte restraining order as a prelude to criminal forfeiture. Our concern under the Constitution was that the freeze could impinge on a criminal defendant's ability to retain counsel. Because a defendant does not have a right to spend funds that are not his to start with, we found that the freeze did not absolutely violate the Sixth Amendment. Id. at 725. But that same Sixth Amendment concern, working through the Fifth Amendment, required more judicial protection for the criminal defendant's right to counsel than an ex parte hearing afforded. If the restraining order left the defendant without other assets to pay for his criminal defense, due process demanded that the trial court hold a post-seizure adversary hearing. At the hearing the government would have to show probable cause of the assets' forfeitability. If the government could not jump past that threshold, perhaps because it chose not to reveal the secrets of its criminal case, the district court was to order the release of sufficient assets to pay reasonable attorney's fees. Id. at 729-30.

The next case extended the principles of MoyaGomez beyond the strictly criminal setting. United States v. Michelle's Lounge, 39 F.3d 684 (7th Cir. 1994) (Michelle's Lounge I). *fn1 There Clement Messino was enmeshed in parallel civil and criminal proceedings stemming from allegations of cocaine dealing. The government froze his assets pursuant to civil forfeiture under 21 U.S.C. sec. 881, and then indicted him for drugs and weapons violations. Again the Sixth Amendment animated our reasoning. We held that due process mandated "a post-seizure 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." Id. at 700-01. Exactly how far the criminal defendant's need to obtain counsel extended, we left unsettled. In particular, we did not squarely answer to what extent, if at all, a Moya-Gomez hearing would be appropriate for paying counsel in the civil forfeiture.

Today we do. Again Clement Messino is the claimant, but it is the government that appeals. (We leave the case history to Michelle's Lounge I, 39 F.3d at 687-90.) The government asks us to decide whether due process requires a hearing on the payment of attorney's fees necessarily incurred in the civil forum for defending against civil forfeiture, but limited in purpose to the freeing of funds for the criminal defense. Put concretely, do the principles of Michelle's Lounge I grant Messino a hearing to try to free assets to pay for litigating Michelle's Lounge I? The district court thought that, under Michelle's Lounge I, Messino was due a hearing. The government disagreed, arguing that Michelle's Lounge I mandated a hearing strictly to release assets to pay criminal counsel. As is its right, the government declined to appear. Moya-Gomez, 860 F.2d at 730. The district court then ordered assets released "for services rendered and to be rendered in this action to protect the 6th Amendment rights of claimant Clement Messino in the parallel criminal proceedings." The government appealed.

In the government's eyes, the alpha and omega of this case are two facts: Messino's lawyers appeared in a civil forum, and Michelle's Lounge I focused on lawyer's fees in a criminal forum. We recognize that the cleavage between the civil and the criminal is one of the deepest in the law. Civil forfeiture under 21 U.S.C. sec. 881 is an in rem action, Austin v. United States, 509 U.S. 602, 604- 06 (1993), with lighter evidentiary burdens and weaker procedural safeguards than criminal forfeiture would require. Michelle's Lounge I, 39 F.3d at 696. What constitutional protection a defendant or claimant may enjoy hinges on whether a particular legal action falls into the civil or criminal camp. See, e.g., United States v. Ursery, 116 S. Ct. 2135, 2149 (1996) (holding that civil in rem forfeitures under 21 U.S.C. sec. 881 do not constitute punishment under the Double Jeopardy Clause). Were this a strictly civil proceeding, the government's reasoning would be more persuasive. And if the claimant Messino were seeking release of property to pay for counsel in matters not intimately bound up with his criminal defense, the government's case would be stronger.

But neither hypothetical is true. We have here, as we did in Michelle's Lounge I, parallel proceedings that can "set[] these two regimes on a collision course." Michelle's Lounge I, 39 F.3d at 696. At the muddy intersection of joint civil and criminal proceedings, the label "civil" cannot by itself foreclose our decision. The Supreme Court rejected just this sort of argument-by-magic-words when it held that the Eighth Amendment governs in rem forfeitures: "[T]he question is not . . . whether forfeiture . . . is civil or criminal, but rather whether it is punishment." Austin, 509 U.S. at 610; see id. at 616 n.9 (adding that reliance "on the technical distinction between proceedings in rem and proceedings in personam . . . would be misplaced"). Cf. Ursery, 116 S. Ct. at 2147 (noting that Double Jeopardy Clause directs courts "to consider whether the proceedings are so punitive in fact as to 'persuade us that the forfeiture proceeding[s] may not be legitimately viewed as civil in nature,' despite Congress' intent.") (quoting United States v. One Assortment of 89 Firearms, 465 U.S. 354, 366 (1984)). There is no doubt that this civil forfeiture is ancillary to the main criminal prosecution of Clement Messino. See United States v. Underwood, ___ F.3d ___, 1997 WL 447815 (7th Cir. Aug. 7, 1997) (vacating Clement Messino's conviction and life sentence for cocaine conspiracy). Indeed, Congress crafted 21 U.S.C. sec. 881 with this specific use in mind: to add a civil arrow to the prosecutor's quiver for fighting drug crimes. Austin, 509 U.S. at 620. See also Ursery, 116 S. Ct. at 2150 (Kennedy, J., concurring).

A more satisfactory angle under the Due Process Clause is to ask why the claimant is seeking an adversarial hearing. The reason, as in Moya-Gomez, is that the restraining order threatens to hamstring his criminal defense. The restraining order thus presses against a tender Sixth Amendment interest. Lawyers, like other people, generally want to get paid for their work. If the government freezes the defendant's assets, it can cripple the defendant's ability to retain "counsel of choice." Moya-Gomez, 860 F.2d at 720. That holds true for a defendant's direct criminal defense; and it holds true as well for hiring a lawyer for the civil forfeiture, though only to the extent needed to release funds to pay for the direct criminal defense. The latter is a corollary of the former. If a claimant cannot pay his lawyers to try for a partial lift of the restraining order, then the government will have secured a freeze not just of his assets, but of his criminal defense as well. Here Messino seeks to release assets to pay attorney's fees that he had no real choice but to incur. His other option was to forego a paid criminal defense. To us, this fact is pivotal, and not the "talismanic invocation of the distinction between criminal and civil proceedings." Michelle's Lounge I, 39 F.3d at 698.

Cast in terms of Mathews v. Eldridge, 424 U.S. 319 (1976), the conclusion is the same. Under Mathews, we weigh three factors to define the strictures of due process in a given arena:

First, the private interest that will be affected by official action; second, 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 finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. Mathews, 424 U.S. at 335.

Here, the private interest, as in Moya-Gomez, is a qualified Sixth Amendment right -- the right to counsel of choice -- for which "the freeze operates as a permanent deprivation." Moya-Gomez, 860 F.2d at 726. If the defendant were denied that right in his criminal defense, the wound could be deep: wrongful imprisonment. Denying that same right in the civil forfeiture could bring about the same end for the same reason. Yet while the injury to the defendant would be identical in kind, the degree would be less. Contesting probable cause for a civil forfeiture is ...

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