Shearman & Sterling LLP | Government Regulatory Enforcement Blog | Supreme Court Of The United States Finds Criminal Forfeiture Statute Does Not Provide For Joint And Several Liability<br >  
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  • Supreme Court Of The United States Finds Criminal Forfeiture Statute Does Not Provide For Joint And Several Liability
    On June 5, 2017, the Supreme Court of the United States unanimously reversed a forfeiture judgment under Section 303 of the Comprehensive Forfeiture Act of 1984, 21 U.S.C. § 853(a)(1) (“Section 853(a)”), holding that forfeiture under Section 853(a) is limited to specific property that has been derived from, or used in, criminal activity by a given defendant.  Honeycutt v. United States, No. 16-142 (June 5, 2017).  This holding resolved a circuit split on the issue and rejected the prevailing majority approach, which had applied joint and several liability to forfeiture under Section 853(a), regardless of whether a party had personally benefited from the subject of the forfeiture.

    Petitioner Terry Honeycutt managed (but did not own) a hardware store that sold an iodine-based water purification product known as Polar Pure, which could be used in the manufacture of methamphetamine.  The government alleged that Honeycutt knew that customers were purchasing the product for that purpose but continued to sell the product.  Because of the large quantity of the product being sold by the hardware store, the Drug Enforcement Agency opened an investigation, and Honeycutt and his brother (who did own the hardware store) were ultimately convicted of conspiring to distribute iodine in violation of 21 U.S.C. §§ 841(c)(2), 843(a)(6), and 846.  The government alleged that the hardware store had profited $269,751.98 as a result of the illicit sales of Polar Pure and sought forfeiture of that amount.  Honeycutt’s brother agreed to forfeiture in the amount of $200,000, thus leaving $69,751.98 that the government sought from Honeycutt on the theory that he was jointly and severally liable for the full amount of the conspiracy’s profits even though he had not personally received those profits. 

    The district court denied the government’s request for the forfeiture against Honeycutt, holding that Honeycutt could not be made to forfeit profits from the scheme that he did not personally receive.  That decision was reversed by the Sixth Circuit, which held that the brothers were jointly and severally liable for any proceeds of the scheme as co-conspirators. 

    The Supreme Court reversed the Sixth Circuit, based principally on a close reading of the statutory text.  Under Section 853(a), any person convicted of certain drug crimes is subject to forfeiture of, in relevant part, “any property constituting, or derived from, any proceeds the person obtained, directly or indirectly.”  The Supreme Court focused on the word “obtained” and reasoned that the provision was incompatible with joint and several liability, which could subject a person to forfeiture of proceeds he did not actually obtain.  The Court used an example of holding a low-level marijuana dealer—who only received $300 a month from the proceeds for his services—jointly and severally liable for the millions of dollars in profits obtained by the operation’s mastermind.  In such situations, the Court held, where a co-conspirator does not actually receive the proceeds of the conspiracy, he cannot be subject to forfeiture of those proceeds.

    While the holding of Honeycutt is based on the specific language of Section 853(a), it will likely have broad ramifications for additional criminal forfeiture provisions involving similar language.  For instance, one portion of 18 U.S.C. § 982, a general criminal forfeiture statute, contains language similar to Section 853(a) in that it allows for forfeiture of property “traceable to the gross receipts obtained, directly or indirectly,” from offenses involving fraud and false statements.  18 U.S.C. § 982(a)(3) (emphasis added).  The government has often applied a broad interpretation to such provisions to elicit large forfeiture judgments from defendants, irrespective of their personal receipt of illicit funds, both in plea agreements and after trials.  Defendants will now be in a much better position to push back after Honeycutt