United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
JOHNSON COLEMAN UNITED STATES DISTRICT COURT JUDGE
government previously moved this Court to order the immediate
turnover of defendant Alice Sherrod's 403(b) Tax
Sheltered Annuity Account held by respondent Horace Mann.
This Court denied that motion based on its determination that
the government had not clearly set forth the legal basis for
its motion. In doing so, this Court cited to United
States v. Dahlman, 61 F.App'x 253, 256 (7th Cir.
2003), an unpublished decision in which the Seventh Circuit
vacated a turnover order where the government had
“never explained under what theory it was entitled to
immediately collect money.” This Court cited to
Dahlman only for the narrow proposition that it is
proper to reject a turnover order that fails to clearly
explain the legal theory under which it is made.
government subsequently filed a renewed motion for a turnover
order , clarifying that it was seeking the turnover
order under the Federal Debt Collection Procedures Act as an
in rem remedy and not as an extension of the
restitution payments that Sherrod is required to make while
on supervised release. 18 U.S.C. § 3613; 28 U.S.C.
§ 3001 et seq..
the judgment against Sherrod provided that, as a term of
supervised release, she must “pay any financial penalty
that is imposed by this judgment that remains unpaid at the
commencement of the term of supervised release.” It
also set forth a payment schedule, providing that Sherrod
must make monthly restitution payments of at least 10% of her
net monthly income while on supervised release. These
provisions, however, amount to a collection mechanism, and do
not limit the government's ability to collect restitution
through the additional civil remedies available to it.
United States v. Hanhardt, 353 F.Supp.2d 957, 960
(N.D. Ill. 2004) (Norgle, J.); see also United States v.
Ekong, 518 F.3d 285, 286 (5th Cir. 2007) (rejecting as
meritless the defendant's argument that a turnover order
should be denied “because the criminal judgment
specified that restitution be paid in installments”);
United States v. Shusterman, 331 F.App'x 994,
996-97 (3rd Cir. 2009) (same).
now contends that the government's renewed motion is
improperly brought, that it should be denied because it will
impose an undue hardship on Sherrod, or that this Court
should reserve ruling until a pending Seventh Circuit case
that might preclude turnover in this instance has been
initial matter, this Court turns to Sherrod's contention
that the government's motion is improperly brought
pursuant to Federal Rule of Civil Procedure 59(e). Sherrod is
partially correct in this respect. Although the government
claims that this court committed a manifest error of law,
that contention is based on a misapprehension of this
Court's purpose in citing to Dahlman. The
government therefore fails to identify a manifest error of
law or fact, newly discovered evidence, or an intervening,
substantial change in the controlling law sufficient to
warrant reconsideration. Fed.R.Civ.P. 59. Although this Court
believed it to be clear from its prior order, it now
clarifies that its prior denial of the government's
turnover order was issued without prejudice to the subsequent
refiling of a renewed turnover order addressing the concerns
that the Court raised. It thus elects to treat the
government's motion as a renewed motion rather than a
motion for reconsideration, and accordingly turns to its
merits of that motion.
contends that this Court should deny the government's
motion in light of the substantial hardship that turnover
would result in. The Federal Debt Collection Procedure Act
(FDCPA) provides that “[t]he court may at any time on
its own initiative or the motion of an interested person, and
after such notice as it may require, make an order denying,
limiting, conditioning, regulating, extending, or modifying
the use of any enforcement procedure under this
chapter.” 28 U.S.C. § 3013. This language is drawn
from New York Civil Practice Law and Rules § 5240, which
has been described as existing to “prevent unreasonable
annoyance, expense, embarrassment, disadvantage, or other
prejudice to any person or the courts.” Paz v. Long
Island R.R., 241 A.D.2d 486, 487, 661 N.Y.S.2d 20
(N.Y.App.Div. 1997). In interpreting the New York provision,
courts have noted that modification is warranted in only
“the gravest circumstances, ” upon a showing by
the debtor of substantial hardship and an unfair burden in
meeting obligations. Midatlantic Nat. Bank /North v.
Reif, 732 F.Supp. 354, 357 (E.D.N.Y. 1990).
limited number of cases interpreting the federal hardship
provision, this Court finds two instructive. In United
States v. King, the 66 year old defendant had a monthly
income of $1, 200 in social security payments, was living
rent-free with his family, and was still able to work. The
court in that case found that hardship did not exist because
the defendant had “a place to stay and an income
stream” and because there was “no record of
mental health or substance abuse problems.” United
States v. King, Criminal No. 08-66-01, 2012 WL 1080297,
at * 6 (E.D. Pa. Apr. 2, 2012). Conversely, a temporary
hardship was found in United States v. Ogburn where
the defendant's husband had just lost his job, the
defendant earned only $22, 100 per year, and the couple had
two young children to support. United States v.
Ogburn, 499 F.Supp.2d 28, 32 (D.D.C. 2007). As of now,
this court perceives that this case falls somewhere in the
middle of these examples.
on the facts described in the presentence report Sherrod, who
is 64 years old, suffers from kidney disease, diabetes,
blindness, high blood pressure, and high cholesterol. Sherrod
recently received a kidney transplant, and her attorney
reports that she was hospitalized for neutropenia prior to
beginning her oft-delayed prison sentence. Sherrod has been
retired since 2010 as a result of her frequent dialysis
regimen. Based on her age, health, and time outside of the
workforce, Sherrod contends that she is unlikely to be able
to find new employment. At the time of the presentence report
Sherrod reported that her monthly income was less than half
of her monthly expenses and that she had a substantial amount
of debt, primarily arising from her medical expenses. The
only assets of any value that Sherrod reported were a
14-year-old car and the funds now at issue.
Court strongly sympathizes with the government's urgent
desire to collect some small portion of the over $7 million
in restitution that Sherrod owes as a result of her criminal
conduct. As this Court noted at sentencing, Sherrod's
crimes took advantage of and harmed an especially vulnerable
segment of the population. Any amount of restitution, however
small in comparison to the $7 million in harm that Sherrod
and her compatriots caused, would help to mitigate that harm.
Simultaneously, however, this Court is obligated to give
serious consideration to Sherrod's asserted hardship.
assessing Sherrod's claim of hardship, this Court is
severely hampered by the lack of information available to it.
A determination such as this would ordinarily require an
evidentiary hearing at which the defendant would be able to
testify and present evidence concerning her income, her
employability, her health, her housing situation, the extent
of support that she receives from her family, and the extent
of her medical debt. This Court, however, is not inclined to
have the defendant hauled before it for such a hearing in
light of her medical condition and the costs that her
transport would therefore incur for the Bureau of Prisons.
Moreover, given the duration of Sherrod's incarceration
and the state of her health it is unlikely that a
contemporaneous hearing would actually reflect upon the
realities that will be facing Sherrod on her release. And
many aspects of Sherrod's future financial condition such
as her employment status, her housing costs, and the amount
of support that her family will provide cannot be predicted
with any certainty until after Sherrod's release.
on the outdated and limited information contained within the
presentence investigation report, this Court believes that
Sherrod might well be able to make a showing of substantial
hardship. This Court does not decide that question, however,
because it cannot do so based solely on the stale information
now before it.
light of the competing and compelling equities before it and
the considerations set forth above, this Court stays
consideration of the government's renewed motion for a
turnover order until Sherrod has begun her term of supervised
release, at which time this Court will be better able to
assess the true scope of Sherrod's financial hardships
based on current information about Sherrod's
circumstances. In the interim, Sherrod's 403(b) Tax
Sheltered Annuity Account with Horace Mann is to remain
frozen pursuant to the terms set forth in the Third-Party
Citation to Discover Assets until further order of this
Court. This Court cautions Sherrod that, in assessing her
financial hardship after her release, ...