United States v. Farmer ( 2001 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA, 
Plaintiff-Appellee,
v.  No. 00-4580
WILLIAM HASKELL FARMER,
Defendant-Appellant.

Appeal from the United States District Court
for the District of South Carolina, at Columbia.
Dennis W. Shedd, District Judge.
(CR-00-385)
Argued: October 29, 2001
Decided: December 12, 2001
Before WILKINSON, Chief Judge, GREGORY, Circuit Judge,
and Malcolm J. HOWARD, United States District Judge
for the Eastern District of North Carolina,
sitting by designation.
Vacated and remanded by published opinion. Chief Judge Wilkinson
wrote the opinion, in which Judge Gregory and Judge Howard joined.
COUNSEL
ARGUED: E. E. Edwards, III, Nashville, Tennessee, for Appellant.
Marvin Jennings Caughman, Assistant United States Attorney,
Columbia, South Carolina, for Appellee. ON BRIEF: C. Rauch Wise,
Greenwood, South Carolina, for Appellant. Scott N. Schools, United
States Attorney, Columbia, South Carolina, for Appellee.
2 UNITED STATES v. FARMER
OPINION
WILKINSON, Chief Judge:
Defendant William Farmer seeks a hearing to determine whether
he is entitled to fund his criminal defense using some or all of the
assets seized pursuant to civil forfeiture statutes prior to his indict-
ment. The district court denied Farmer’s request for a hearing.
Because Farmer made a substantial showing that some of the seized
assets may be both legitimate and necessary to hire an attorney, we
vacate the judgment and remand with directions to hold a hearing for
the limited purpose of determining whether untainted assets have
been seized and whether Farmer requires those assets to hire counsel.
I.
On July 16, 1998, United States Customs Agents executed search
warrants at Defendant William Farmer’s residence and warehouse.
These warrants were obtained upon a showing of probable cause that
Farmer was engaged in illegal counterfeiting of clothing trademarks
in violation of federal law. During these and subsequent searches, the
agents seized, inter alia, numerous documents, ten motor vehicles, a
big screen television, over 3,000 boxes of merchandise, $160,000 in
cashier’s checks, and more than $380,000 in cash pursuant to civil
forfeiture statutes.
In August 1998, Farmer made a motion in the district court for the
return of the seized property. The district court denied Farmer’s
motion without a hearing. In an attempt to trigger a civil forfeiture
proceeding, Farmer then filed a claim and posted a $5,000 cost bond
pursuant to 19 U.S.C. § 1608. Farmer also moved a second time for
the return of the property. In August 1999, the district court denied
Farmer’s second motion, concluding that the government was pro-
ceeding diligently and that requiring it to return the seized property
or institute a forfeiture action could interfere with the government’s
ongoing criminal investigation of Farmer. No civil forfeiture action
was ever commenced.
On May 2, 2000, almost two years after the government seized Far-
mer’s assets, a ten count indictment was handed down against Farmer.
UNITED STATES v. FARMER 3
The indictment charged Farmer with, inter alia, conspiracy to traffic
in clothing bearing counterfeit trademarks in violation of 18 U.S.C.
§ 371, conspiracy to engage in unlawful financial transactions in vio-
lation of 18 U.S.C. § 1956(h), and trafficking in counterfeit clothing
and money laundering in violation of 18 U.S.C. §§ 2320 and 1957. In
addition, pursuant to 18 U.S.C. § 982, the indictment sought forfeiture
of the property previously seized. The indictment indicated that the
property was subject to forfeiture as either instruments or proceeds of
Farmer’s alleged trademark and money laundering violations.
On July 21, 2000, Farmer filed a motion for an immediate adver-
sary hearing to determine if a portion of the seized funds should be
released so that he could pay defense costs. Farmer alleged that the
government seized all of his substantial assets in 1998, put him out
of business in the process, and prevented him from using his own
legitimate assets to fund his criminal defense. Farmer argued that he
had a Sixth Amendment right to use his legitimate property to hire the
attorney of his choice and that he had been deprived of that right
without a meaningful opportunity to be heard in violation of the Due
Process Clause. Farmer emphasized that the magistrate judge had
concluded at arraignment that Farmer was entitled to appointed coun-
sel because he was effectively rendered indigent by the government’s
seizure of his property. The magistrate reached this conclusion based
on Farmer’s affidavit and testimony under oath. Furthermore, Farmer
argued that Customs officials had admitted that at least some of the
merchandise seized was untainted. In response, the United States dis-
puted that Farmer had no substantial assets with which to hire coun-
sel. The government also stressed that Farmer had not challenged the
probable cause determination underlying the search warrants used to
seize his assets.
On August 10, 2000, the district court summarily denied Farmer’s
motion for an adversary hearing. Farmer appeals.1
1
Farmer’s appeal is before this court pursuant to 28 U.S.C. § 1291 and
the collateral order doctrine of Cohen v. Beneficial Industrial Loan
Corp., 337 U.S. 541, 546-47 (1949). See, e.g., United States v. Michelle’s
Lounge, 39 F.3d 684, 693-94 (7th Cir. 1994) (collecting cases where
courts have reviewed similar orders under the collateral order doctrine);
United States v. Jones, 160 F.3d 641, 644 (10th Cir. 1998).
4 UNITED STATES v. FARMER
II.
The Supreme Court has made clear that a criminal defendant has
no Sixth Amendment right to use illegally obtained funds to hire an
attorney. In Caplin & Drysdale v. United States, 491 U.S. 617 (1989),
the Court concluded that any Sixth Amendment right to obtain coun-
sel of choice does not extend beyond the individual’s right to spend
his own legitimate, nonforfeitable assets. Caplin, 491 U.S. at 624-33.
The Court explicitly rejected "any notion of a constitutional right to
use the proceeds of crime to finance an expensive defense." Id. at 630.
And the Court stressed that "there is a strong governmental interest
in obtaining full recovery of all forfeitable assets, an interest that
overrides any Sixth Amendment interest in permitting criminals to
use assets adjudged forfeitable to pay for their defense." Id. at 631.
Furthermore, in Caplin’s companion case, the Court held that the pre-
trial restraint of a criminal defendant’s assets does not violate the
Constitution as long as the assets are restrained based upon a finding
of probable cause that they are subject to forfeiture. United States v.
Monsanto, 491 U.S. 600, 615-16 (1989).
However, Caplin and Monsanto expressly left open the issue of
whether a defendant has a Fifth Amendment right to a pretrial hearing
to determine whether some or all of the seized assets may properly
be used to fund his criminal defense. In Monsanto, the Supreme Court
stated:
We do not consider today, however, whether the Due Pro-
cess Clause requires a hearing before a pretrial restraining
order can be imposed. . . .
Though the United States petitioned for review of the
Second Circuit’s holding that such a hearing was required,
Farmer raises various other claims, among them that he is entitled to
a release of funds for basic living expenses and that he is entitled to
accrued interest on the seized property. However, these matters are
beyond the scope of the basic trial right Farmer asserts in this appeal,
namely his right to hire the counsel of his choice with his own legiti-
mately obtained assets.
UNITED STATES v. FARMER 5
. . . given that the Government prevailed in the District
Court notwithstanding the hearing, it would be pointless for
us now to consider whether a hearing was required by the
Due Process Clause.
Monsanto, 491 U.S. at 615 n.10.
Prior to Caplin and Monsanto, this court addressed a criminal
defendant’s due process right to a hearing when his assets are seized
pursuant to criminal forfeiture statutes. In United States v. Harvey,
814 F.2d 905 (4th Cir. 1987), we stated that "the issuance of ex parte
restraining orders after indictment without any post-deprivation hear-
ing other than a criminal trial . . . violates fifth amendment due pro-
cess guarantees" when all of a defendant’s substantial assets have
been restrained and the defendant seeks to utilize restrained assets to
fund his legal defense. Harvey, 814 F.2d at 913, 928-29.2
Our sister circuits have agreed with the conclusion in Harvey. They
have held that due process requires a pretrial adversary hearing when
a defendant claims that a portion of the assets restrained pursuant to
criminal forfeiture statues are untainted and that he has no other funds
from which to secure the counsel of his choice. See, e.g., United
States v. Jones, 160 F.3d 641, 645-49 (10th Cir. 1998); United States
v. Monsanto, 924 F.2d 1186, 1191-98 (2d Cir. 1991) ("Monsanto
IV"); United States v. Moya-Gomez, 860 F.2d 706, 725-30 (7th Cir.
1988); United States v. Lewis, 759 F.2d 1316, 1324-25 (8th Cir.
1985); United States v. Crozier, 777 F.2d 1376, 1383-84 (9th Cir.
1985); United States v. Long, 654 F.2d 911, 915-16 (3d Cir. 1981).
But see United States v. Register, 182 F.3d 820, 835 (11th Cir. 1999)
(recognizing that the Eleventh Circuit is the "only circuit holding that,
although pre-trial restraint of assets needed to retain counsel impli-
cates the Due Process Clause, the trial itself satisfies this require-
ment"). At least one circuit has also concluded that due process
requires an adversary hearing on probable cause "when the district
2
The court in In re Forfeiture Hearing as to Caplin & Drysdale, 837
F.2d 637 (4th Cir. 1988) (en banc), did not grant rehearing en banc on
this Fifth Amendment issue in Harvey. See 837 F.2d at 641. And the
Supreme Court explicitly reserved the issue in Monsanto. See 491 U.S.
at 615 n.10.
6 UNITED STATES v. FARMER
court has found that the government has seized through civil forfei-
ture all of the assets a criminal defendant needs to obtain counsel."
United States v. Michelle’s Lounge, 39 F.3d 684, 700-01 (7th Cir.
1994).
III.
Due process requires that a person not be deprived of property
without notice and an opportunity for a hearing "at a meaningful time
and in a meaningful manner." Fuentes v. Shevin, 407 U.S. 67, 80
(1972) (internal quotation omitted). When identifying the specific dic-
tates of due process, three factors must be considered: (1) "the private
interest that will be affected by the official action;" (2) "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 (3) "the Government’s interest, including the . . .
administrative burdens that the additional or substitute procedural
requirement would entail." Mathews v. Eldridge, 424 U.S. 319, 334-
35 (1976). Courts have consistently used this Mathews analysis to
determine if a defendant is entitled to a postseizure, pretrial adversary
hearing. See, e.g., Harvey, 814 F.2d at 928; Jones, 160 F.3d at 645-
47; Michelle’s Lounge, 39 F.3d at 697-701; Monsanto IV, 924 F.2d
at 1193-98.
First, Farmer has advanced a "private interest" in obtaining a pre-
trial hearing. See, e.g., Jones, 160 F.3d at 646; Michelle’s Lounge, 39
F.3d at 697-98; Monsanto IV, 924 F.2d at 1193-95. While Caplin
made absolutely clear that there is no Sixth Amendment right for a
defendant to obtain counsel using tainted funds, Farmer still possesses
a qualified Sixth Amendment right to use wholly legitimate funds to
hire the attorney of his choice. See, e.g., Caplin, 491 U.S. at 624-25;
Powell v. Alabama, 287 U.S. 45, 53 (1932). Farmer’s assets were
seized pursuant to civil forfeiture, based on the same allegedly illegal
activities underlying his current criminal indictment. This places Far-
mer "in the same position as a criminal defendant whose assets are
seized pursuant to criminal forfeiture." Michelle’s Lounge, 39 F.3d at
697. Therefore, Harvey and the cases from our sister circuits that
found a private interest in a hearing when assets were restrained pur-
suant to criminal forfeiture statutes are analogous.
UNITED STATES v. FARMER 7
This private interest would be absent if Farmer possessed the
means to hire an attorney independently of assets that were seized.
Farmer has previously declared under oath that, due to the govern-
ment’s seizure of his property, he does not have funds to hire counsel
for his criminal defense. And the magistrate judge concluded, based
on Farmer’s "affidavit and [Farmer’s] answers to [his] questions," that
Farmer was effectively rendered indigent by the government’s seizure
of his property. While the adversary hearing Farmer seeks may call
his protestations of indigency into question, the magistrate’s explicit
finding constitutes a threshold showing that Farmer is without funds
to hire the attorney of his choice. If a defendant does not make such
a threshold showing of need to use wrongly seized assets to pay his
attorneys, "then the private interest of the Mathews calculus drops out
of the picture, tipping the balance of interests against a post-restraint
hearing." Jones, 160 F.3d at 647; see also Michelle’s Lounge, 39 F.3d
at 701 (requiring this threshold determination before due process enti-
tles the defendant to a hearing); Moya-Gomez, 860 F.2d at 730(same). In sum, a defendant must "show a bona fide need to utilize
[seized] assets . . . to conduct his defense" in order to be entitled to
a hearing. United States v. Kirschenbaum, 156 F.3d 784, 792 (7th Cir.
1998) (internal quotation omitted).
Second, under the circumstances of this case, there is a risk of erro-
neous deprivation of Farmer’s interest in the absence of any hearing.
It is true, as the government notes, that the search warrants were
issued in this case upon a showing of probable cause to believe that
the assets were tainted and that Farmer has failed to challenge the
issuance of the search warrants at any point. However, that is not the
end of the story. To begin with, there has been no civil forfeiture pro-
ceeding commenced, in which Farmer could have contested the legiti-
macy of the assets, in the nearly two years between the seizure of the
assets and Farmer’s indictment. Further, one of Farmer’s attorneys
has submitted an affidavit under oath stating that Customs officials
personally admitted to him that many of the items seized were legiti-
mate dry goods which were not counterfeit and had no unauthorized
trademarks. The attorney’s affidavit reads as follows:
4. In a conversation held shortly before March 5, 1999,
Agent Pharis related to [me] that customs had determined
that 30 pallets containing NFL jackets, raincoats, boots, key
8 UNITED STATES v. FARMER
chains and Super Bowl hats were in fact legitimate goods.
Agent Pharis further stated that a substantial quantity of
Tommy Hilfiger merchandise [was] legitimate but they
wanted to check to see if any of that merchandise had been
taken from Dillard’s as that store had incurred a major theft.
An attorney’s declaration under oath that government agents person-
ally admitted to him that legitimate assets were seized is not a matter
we can summarily discount. Allowing Farmer to rebut the govern-
ment’s showing of probable cause "would afford [him] an important
opportunity to be heard before his assets to pay attorneys are, in
effect, permanently seized." Michelle’s Lounge, 39 F.3d at 700; see
also Jones 160 F.3d at 646-47; Monsanto IV, 924 F.2d at 1195.
Finally, the government would not be unduly burdened by the hear-
ing Farmer seeks. See, e.g., Jones, 160 F.3d at 647; Michelle’s
Lounge, 39 F.3d at 700. The fact that Farmer’s representations of
indigency were credited by the magistrate judge and that his attorney
averred under oath that the government’s own agents have conceded
the legitimate character of at least a portion of the seized assets does
not mark this as a case that will open the floodgates to hearings on
flimsy or insubstantial grounds. Such threshold showings "protect the
government and its resources from frivolous challenges" to forfei-
tures. Jones, 160 F.3d at 647. Furthermore, at oral argument the gov-
ernment conceded that it is not opposed to giving Farmer a hearing
if he shows that he lacks the ability to hire an attorney. The govern-
ment merely disputes the conclusion that Farmer has made a suffi-
cient initial showing regarding his need to use seized assets to hire
counsel.
Considering the three Mathews factors as they apply to Farmer, we
conclude that due process requires a hearing for him to challenge
probable cause. We stress, however, that this is a hearing for limited
purposes. See Jones, 160 F.3d at 647-48 (noting limited nature of
hearing); Michelle’s Lounge, 39 F.3d at 701 (same). When assets are
seized pursuant to civil forfeiture, the hearing right applies "only inso-
far as the civil seizures affect a defendant’s right to select his counsel
of choice in a related criminal case, not in the civil forfeiture case
itself." Michelle’s Lounge, 39 F.3d at 704 (Flaum, J., concurring); see
also id. at 698. And the hearing is certainly not the forum to reach a
UNITED STATES v. FARMER 9
definitive conclusion on the legality of each asset seized. Instead, a
brief hearing will provide an opportunity for Farmer to prove by a
preponderance of the evidence that the government seized untainted
assets without probable cause and that he needs those same assets to
hire counsel. See, e.g., Michelle’s Lounge, 39 F.3d at 701; Monsanto
IV, 924 F.2d at 1194. The government for its part may present evi-
dence that Farmer has other substantial assets with which to hire
attorneys and/or evidence of probable cause to believe that the seized
assets are tainted and forfeitable.
"Due process does not automatically require a hearing and a defen-
dant may not simply ask for one." Jones, 160 F.3d at 647. District
courts enjoy broad discretion to determine the need for hearings of
this sort, and appellate courts remain properly respectful of the trial
courts’ supervision of such pretrial proceedings. Here, however,
because the magistrate judge credited Farmer’s initial representations
that the government had seized all of his substantial assets, and
because counsel has sworn in a detailed affidavit that the govern-
ment’s own agents acknowledged that many seized assets were legiti-
mate, we hold that the Due Process Clause requires an adversary
hearing for the purpose described above.
IV.
For the foregoing reasons, we vacate the judgment of the district
court and remand with directions to hold a hearing to determine
whether there are untainted, legitimate assets in the government’s
possession and whether those assets are necessary for Farmer to hire
counsel for his criminal defense.
VACATED AND REMANDED