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Posted on Friday, July 13, 2018

Dude, Where’s My Car? Reining in Civil Forfeiture

On June 18, 2018, the Supreme Court agreed to hear an appeal in Timbs v. Indiana, a case with important implications for the continued use of civil forfeiture by state police agencies. Given the ever-increasing use of civil forfeiture by states—a years-long trend fueled by the use of forfeiture to fund agency budgets—this case has the potential to impact significantly the practices of state police agencies.

Both federal and most state laws authorize the government to use what is called “civil forfeiture” to seize not only property that is the proceeds of criminal conduct, but also property that is used to commit the alleged crime. Civil forfeiture has been applied to a wide variety of property—for example homes used in drug transactions, or vehicles driven by men patronizing prostitutes. Civil forfeiture has distinct advantages for prosecutors: Seizure of the property under civil forfeiture laws does not require conviction of any crime, and the standard of proof is far lower than what would be required if authorities sought forfeiture as part of a criminal indictment. In addition, innocent owners of the property face daunting obstacles to assert their rights in property that has been seized for forfeiture.

The use of civil forfeiture by state police agencies has accelerated significantly in recent years, largely spurred on using such processes to fund police budgets. According to the Institute for Justice, most U.S. states allow between 45 and 100 percent of the value of forfeited property to be directed to law enforcement. (See http://ij.org/report/policing-for-profit/grading-state-federal-civil-forfeiture-laws/ .)

Along with the increased use of civil forfeiture by states has come perceived abuses of those laws. In many cases, the value of the property seized is greatly disproportionate to the seriousness of the wrongful conduct on which the state bases its claim for forfeiture. Thus, for example, in Timbs, the defendant was convicted of a drug felony in Indiana for which the maximum fine was $10,000. After a guilty plea based upon a single unconsummated sale of heroin, the defendant was sentenced to one year in home detention and five years probation, and agreed, among other things, to pay $1,200 in court costs and fees. But the state also sought, through civil forfeiture, to seize the car he was driving at the time of his offense—a 2012 Land Rover LR2 worth approximately $40,000. Timbs successfully challenged this seizure in the trial court as unlawfully disproportionate but lost that argument in the Indiana Supreme Court.

Federal courts have uniformly held that, in federal civil forfeiture proceedings, the Eighth Amendment’s prohibition against “excessive fines” limits the ability of the government to seize and forfeit property the value of which is disproportionate to the underlying wrongful conduct. But, in Timbs, the Indiana Supreme Court ruled that prohibition in the Eighth Amendment does not apply to the conduct of state agencies through the U.S. Constitution’s Fourteenth Amendment. That ruling is part of a split among state supreme courts that the Supreme Court will now resolve.

While Timbs arose in the context of a drug felony, the Supreme Court’s decision in the case has potential consequences for white collar criminal cases as well. It is not uncommon, in business fraud cases, for prosecutors to obtain court authority to freeze defendants’ assets with an eye toward eventual civil forfeiture, and the freezing of such assets can make it difficult for defendants in such cases to hire attorneys or even to pay their day-to-day bills. The question of whether the Eighth Amendment’s requirement of proportionality will apply to the states could have significant consequences for the use of such tactics in state agency investigations.

David Deitch is leads the White Collar Defense and Corporate Compliance practice at Berenzweig Leonard, LLP. David can be reached at DDeitch@BerenzweigLaw.com.