Luis v. United States: When does the defendant’s substitute asset become government property?
06 Oct 2017

Stefan Cassella of Asset Forfeiture Law, LLC looks at the Fourth Circuit’s decision limiting Luis v. United States to the pre-conviction context, and barring the defendant from using substitute assets to finance his appeal.


[Substitute Assets / Right to Counsel / Application of Luis / Rule 32.2 ]


The Supreme Court’s decision in Luis does not give the defendant to right to use substitute assets to retain counsel for his appeal; he has a Sixth Amendment right to use property to retain counsel only while it belongs to him; once the court includes the property in a forfeiture order, it belongs to the Government.

Under Rule 32.2(e), the Government can move at any time to forfeit a substitute asset; therefore, the Government was not required to move to forfeit the defendant’s substitute property prior to sentencing but could wait until after sentencing to do so. United States v. Marshall, ___ F.3d ___, 2017 WL 4227960 (4th Cir. Sept. 25, 2017).

Fourth Circuit * Defendant was convicted of a drug offense and was ordered at sentencing to pay a $51.3 million forfeiture money judgment. Two days thereafter, Defendant moved for the release of $59,000 that the Government had restrained in Defendant’s bank account pre-trial but had failed to ask the court to include in the forfeiture order.

The Government responded by moving pursuant to Rule 32.2(e) to forfeit the $59,000 as a substitute asset, and the court granted the motion. Defendant then moved to release the $59,000 so that he could use it to pay for counsel to handle his appeal. The district court denied the motion and Defendant appealed that order.

The Court of Appeals agreed to stay the appeal on the merits of the underlying conviction until it could determine if Defendant had the right to use the forfeited money to retain appellate counsel.

Defendant raised two issues on appeal – one constitutional and one procedural. First, he argued that under the Supreme Court’s decision in Luis v. United States, he had a Sixth Amendment right to use untainted property – i.e., substitute assets – to retain counsel of his choice to handle his appeal.

The court held, however, that Luis was distinguishable. In Luis, the Supreme Court held that a criminal defendant has a Sixth Amendment right to use untainted assets to hire counsel of his choice, even though those assets may become subject to forfeiture in the event of his conviction.

The point, the Court said, was that prior to his conviction the untainted assets belong to the defendant, and he has the right to use them to retain counsel if he wishes to do so. In contrast, a defendant may not use tainted property to retain counsel because that property belongs to the Government, and as the Court held in Caplin and Drysdale, “a defendant has no Sixth Amendment right to spend another person’s money for services rendered by an attorney.

The defendant’s ability to use property to retain counsel turns, therefore, on who owns the property at the time the defendant wants to use it.

“If the defendant owns the property, he is entitled to use it for his defense; if he does not own the property, he may not.” Prior to trial, substitute assets belong to the defendant so he may use them to retain counsel, but once a court enters an order forfeiting his property as a substitute asset, the defendant’s property rights are extinguished, and the property belongs to the United States.

Accordingly, in this case, once the district court granted the Government’s motion to forfeit the $59,000 as a substitute asset, the money belonged to the Government, and under Caplin & Drysdale, Defendant had no right to use the Government’s money to retain counsel.

Defendant’s procedural objection concerned the timing of the Government’s motion to forfeit the $59,000. Under Rule 32.2(b), he argued, the court was required to determine what property is subject to forfeiture “as soon as practical after a verdict or finding of guilty,” and then to “promptly enter a preliminary order of forfeiture” that becomes final as to the defendant at sentencing.

By waiting until after sentencing to move for the forfeiture of the $59,000, Defendant argued, the Government violated this rule, and the forfeiture order was therefore void. But the panel disagreed for two reasons. First, the timing requirements in Rule 32.2(b) do not apply to the forfeiture of substitute assets.

To the contrary, a motion to forfeit substitute assets is governed by Rule 32.2(e), which provides that the Government may file its motion “at any time.” Accordingly, there was no reason why the Government could not wait until after sentencing to file its motion to forfeit the $59,000.

In addition, even if the forfeiture of substitute assets were governed by Rule 32.2(b), a violation of the timing requirement would not render the forfeiture order void absent a showing that the violation affected the defendant’s substantial rights. Here, Defendant was well aware – from the listing of the $59,000 as property subject to forfeiture in a bill of particulars that was filed months before trial – that the Government would be seeking the forfeiture of that property.

Thus, the forfeiture of the money as a substitute asset came as no surprise to him and did not violate his rights. Accordingly, the court affirmed the denial of Defendant’s motion to use the forfeited substitute assets to retain counsel to handle his appeal. SDC Contact: Former AUSA Evan Shea (D. Md.)



The key point in this case is the way the panel explained the Supreme Court’s decision in Luis v. United States, 136 S. Ct. 1083 (2016), and how it contrasted that with the rationale in Caplin & Drysdale v. United States, 491 U.S. 617 (1989). In Caplin & Drysdale, the Court held that the defendant could not use his forfeited property to pay his lawyer because the proceeds of crime belong to the Government, not to the defendant.

A defendant, the Court famously declared, has no right to use another person’s money to retain counsel. In contrast, in Luis, the Court held that untainted property belongs to the defendant, at least until he is convicted, and he therefore has the right to use it to pay a “reasonable” fee to an attorney of his choice. The question in this case then was, when does a substitute asset stop being the property of the defendant and become the property of the Government.

The court does not answer that question categorically, but it holds that the Government’s title in a substitute asset vests at the latest at the time the 3 court enters a forfeiture order under 21 U.S.C. § 853(p).

Because the court had already granted the Government’s Rule 32.2(e) motion to forfeit the substitute asset by the time the defendant in this case moved to use it retain appellate counsel, he was too late. Left unanswered, of course, is exactly when the Government’s interest in a substitute asset does vest.

The panel seems to concede that Luis has implicitly overruled the Fourth Circuit’s pre-Luis rule that the relation back doctrine applies to a substitute asset, and that the Government’s title vests at the time of the offense, but the panel expressly reserved ruling on that issue.

The issue is important not only to determine when Luis applies – i.e., when the defendant may use the money to retain counsel – but also to determine when third party rights apply – i.e., when a third party who takes title to the substitute asset has to show that she was a bona fide purchaser for value under Section 853(n)(6)(B).

For the latter purpose, it could matter greatly whether the Government’s title vested at the time of conviction, at the time when the Government files is motion to forfeit the substitute asset, or when the court grants that motion and issues its order.


Stefan Cassella, Asset Forfeiture Law, LLC

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