United States v. Mills, Crim. No. 17-122

UNITED STATES OF AMERICA, v. GARY MILLS, Defendant,UNITED STATES OF AMERICA, v. $5,899.79 FORMERLY CONTAINED IN PNC BANK ACCOUNT #xxxxxx4718, et al., Defendant

Crim. No. 17-122

Civ. No. 15-1274

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

November 20, 2018

Judge Nora Barry Fischer

MEMORANDUM OPINION

This matter returns to the Court to resolve pretrial disputes between the parties in this criminal tax case against Gary Mills and a related civil forfeiture action which has been stayed pending the disposition of the criminal case. Although the parties were able to narrow some of their discovery disputes,¹ the Government opposes the remaining issues set forth in Defendant's Motion for Additional Discovery filed in the criminal case, (Crim. No. 17-122, Docket No. [109]), and his Motion/Application for Luis Hearing filed in the civil forfeiture action, (Civ. No. 15-1274,Docket No. [14]). In short, Defendant seeks a pretrial hearing under Luis to challenge the probable cause findings related to six bank accounts which are restrained by Court Orders and the release of $107,000 to fund his defense from such accounts; early disclosure of Jencks materials; and an unredacted version of a memorandum from Matthews International. (Id.). As noted, the Government opposes all of the requested relief. The motions have been exhaustively briefed and argued by the parties as the Court received pre-hearing briefing, heard oral argument at a motion hearing held on August 8, 2018, the official transcript of which has been filed with the Court, and accepted post-hearing supplemental briefing submitted by the parties, the last of such filings being made on October 22, 2018.² (See Crim. No. 17-122, Docket Nos. 109, 118, 121, 129; Civ. A. No. 15-1274, Docket Nos. 14, 21, 22, 29, 30, 31, 33, 36, 39, 41, 44). After careful consideration of the parties' arguments and for the following reasons, Defendant's Motions are DENIED, without prejudice.

As the Court writes primarily for the parties, and many of the facts relevant to this matter are set forth in the Court's Memorandum Opinion of March 19, 2018, (Crim. No. 17-122, Docket No. 84), the Court focuses on its analysis of the disputed legal issues, starting with the request for the Luis hearing and the release of funds from the restrained accounts.

A. Motion for Luis Hearing and Release of Funds from Restrained Accounts

The parties have raised and identified numerous disputes as to the defense request for a Luis hearing and release of the restrained funds but the Court finds that Defendant's motion can be resolved by answering two essential questions:

• first, whether the defense must make a showing of financial need in order to obtain such a hearing after Luis and a number of other decisions cited by the defense or if the Farmer-Jones framework previously adopted by the Third Circuit requiring such a showingshould continue to be employed, as advocated by the Government; and,

• second, whether the defense has made such a showing based on the evidence presented at this stage of the case.

Having carefully considered the parties' positions as to these issues, in light of all of the facts and circumstances of this case, the Court holds that the Farmer-Jones framework should be applied to evaluate this motion and that Defendant has failed to demonstrate a sufficient financial need to warrant a pretrial hearing, i.e., he has not shown that his Sixth Amendment right to counsel is being impaired by the restraint of the six bank accounts. The Court's rationale follows.

By way of background, "[u]nder the Sixth Amendment, [a defendant] has a right to counsel that he can afford to hire, but he does not have a right to the release of funds subject to forfeiture to obtain counsel of his choice." United States v. Thomas, 440 F. App'x 148, 151 (3d Cir. 2011) (citing Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 626-33, 109 S.Ct. 2646, 105 L.Ed.2d 528 (1989)). Stated another way, "[a]lthough the Sixth Amendment grants a defendant the right to obtain counsel of his choice, this right 'does not extend beyond the individual's right to spend his own legitimate, nonforfeitable assets.'" United States v. Yusuf, 199 F. App'x 127, 132 (3d Cir. 2006) (quotations omitted). Forfeiture law distinguishes between assets which are tainted, such as the proceeds of a crime, making them directly subject to forfeiture and other assets which are not tainted but subject to forfeiture only as a "substitute asset" because the tainted assets are no longer available. See e.g., Honeycutt v. United States, 137 S. Ct. 1626, 1632, 198 L. Ed. 2d 73 (2017). The pretrial restraint of tainted assets upon a finding of probable cause that the assets will be subject to forfeiture is Constitutionally permissible. See also Kaley v. United States, 571 U.S. 320, 134 S.Ct. 1090, 1095, 188 L.Ed.2d 46 (2014) ("In Monsanto, our principal case involving this procedure, we held a pre-trial asset restraint constitutionally permissible wheneverthere is probable cause to believe that the property is forfeitable. That determination has two parts, reflecting the requirements for forfeiture under federal law: There must be probable cause to think (1) that the defendant has committed an offense permitting forfeiture, and (2) that the property at issue has the requisite connection to that crime." (internal citations omitted)). In Luis, the Supreme Court held that "the pretrial restraint of legitimate, untainted assets needed to retain counsel of choice violates the Sixth Amendment." Luis, 136 S.Ct. at 1088.

The threshold issue here is whether the Farmer-Jones framework should be applied by this Court when evaluating Defendant's request for a pretrial hearing and the release of restrained funds for defense purposes. Pursuant to this approach, "a due process hearing is required if the defendant: (1) demonstrates to the court's satisfaction that [he] has no assets, other than those restrained, and (2) makes a prima facie showing of a bona fide reason to believe the grand jury erred in determining that the restrained assets constitute or are derived, directly or indirectly, from gross proceeds traceable to the commission of the offense." Yusuf, 199 F. App'x at 132-33 (internal quotations omitted). If the hearing is held, its scope "is limited to the traceability of the restrained assets" and "the government need not reestablish probable cause to believe that [the defendant is] guilty of the underlying offense." Id. The Court finds that the Farmer-Jones framework must be applied for several reasons.

First, Luis did not change the law of the Third Circuit, which had previously held that "substitute assets are not subject to pretrial restraint." United States v. Pantelidis, 335 F.3d 226, 234 (3d Cir. 2003) (citing In re Assets of Martin, 1 F.3d 1351 (3d Cir. 1993)) (other citations omitted). At the time Luis was decided, the Fourth and Eleventh Circuits were the only Circuits to permit pretrial restraints of substitute assets and the Supreme Court reversed an order by the Eleventh Circuit. Luis, 136 S.Ct. at 1088. Honeycutt essentially recognized the same principle,holding that there was no statutory basis for the imposition of joint and several liability for forfeiture judgments pursuant to 21 U.S.C. § 853(a). Honeycutt, 137 S.Ct. at 1635.

Second, as the Government advocates, Courts in the Third Circuit have endorsed the Farmer-Jones framework for analyzing such claims both prior to and after Luis was decided. See e.g., Yusuf, 199 F. App'x 132-33; United States v. Fuhai Li, No. 3:16-CR-00194, 2018 WL 1299724, at *10 (M.D. Pa. Mar. 13, 2018). Numerous Courts outside the Third Circuit have continued to apply the Farmer-Jones or a similar approach after Luis and/or Honeycutt were decided. See e.g., United States v. Kahn, 890 F.3d 937 (10th Cir. 2018) (applying Farmer-Jones analysis); United States v. Johnson, 683 F. App'x 241, 248-50 (4th Cir. 2017) (same); United States v. Singleton, 2018 WL 5075982, at *49 (E.D. Ky. Mar. 20, 2018) (listing numerous cases for same proposition). In light of this authority, this Court sees no reason to depart from the settled analytical framework absent directives from the U.S. Court of Appeals for the Third Circuit or the Supreme Court to do so.

Third, while Defendant maintains that the Court should hold that he does not need to make a showing of financial necessity in light of the Supreme Court's decisions in Luis and Honeycutt, and non-binding authority from the Fourth Circuit in United States v. Chamberlain, 868 F.3d 290 (4th Cir. Aug. 18, 2017), and the U.S. District Court for the Eastern District of Virginia in United States v. Miller, 295 F. Supp. 3d 690 (E.D. Va. Mar. 8, 2018), such decisions are distinguishable from the instant matter. To this end, the Government conceded in each instance that substitute or untainted assets had been restrained. See id. It also appears that the impairment of the defendants' Sixth Amendment rights was not at issue in Luis, Honeycutt and Chamberlain. Id. Although the Court in Miller noted that a pretrial restraint of untainted assets was deemed illegal under Fourth Circuit law, the Court continued that when the defendant's right to counsel is not being impairedby the pretrial restraint of assets, it affects the "urgency" of the motion and the timing of the decision. Miller, 295 F. Supp. 3d 690, 696, n.5 ("The question whether defendant needs the funds at issue for his legal defense simply affects whether there is an additional Sixth Amendment concern associated with the pretrial restraint of the assets and adds to the urgency of the motion."). Given same, this Court does not interpret Miller as requiring a pretrial hearing in all instances where a defendant challenges whether the Government has secured a pretrial restraint of untainted assets.³ Rather, if the defendant cannot make a showing of financial need, then the Court need not hold the hearing in advance...