What we really need in a forfeiture reform bill – Part 2B: Fixing the holes in CAFRA’s attorney fees provisions

DSC00260(c) 2015 Brenda Grantland – short link http://wp.me/p5xzo0-8P

In a previous blog, What we really need in a federal forfeiture reform bill – part 2A, I talked about how the next round of forfeiture reform should repair the gaping holes the courts have gouged into CAFRA’s reforms, particularly those affecting the availability of counsel.  One CAFRA reform that clearly did not hold is the provision requiring the government to pay the attorney’s fees of claimants who substantially prevail.

A Lexis search conducted this week turned up only 23 reported civil forfeiture cases in which CAFRA fees were granted, and 8 civil forfeiture cases where CAFRA fees were denied.  And that was for the entire 15 years since CAFRA was enacted.  That is less than two cases per year! Tens to hundreds of thousands of federal civil forfeiture cases have been litigated in that 15 year period.

Clearly CAFRA’s fee-shifting provisions did not work as planned.  This is another of CAFRA’s reforms that the government has effectively nullified in practice, persuading  courts to interpret the statutes restrictively and illogically to avoid awarding  fees.

Attracting attorneys to represent forfeiture claimants who can’t afford extensive litigation

Congress enacted the fee-shifting provision in CAFRA to attract counsel to represent claimants and “level the playing field,” so claimants have a fair chance of successfully defending their cases.

Asset forfeiture is a very complex area of law, with some procedures grafted from civil procedure, some from criminal procedure, and others that are unlike procedures in any other type of litigation. There is a difficult learning curve even for experienced lawyers, but it’s nearly impossible for pro se litigants to successfully defend their own forfeiture cases.  A claimant who can’t afford counsel is unlikely to win.

Congress enacted the CAFRA attorney’s fees provisions to increase the availability of defense counsel willing to take on the cases of claimants who have a valid defense, but lack the funds to litigate their cases to completion.  CAFRA’s sponsors believed that the promise that the court would award attorney’s fees (to be paid by the government) if the claimant won would lure experienced forfeiture counsel to take on these cases, even if the clients were of modest means — or if most or all of their assets had been seized.

Congress also intended these provisions to make successful forfeiture claimants whole – to put them in the same place they would have been had the government not targeted them for forfeiture.

“[T]he stated purpose of CAFRA is ‘to make federal civil forfeiture procedures fair to property owners and to give owners innocent of any wrongdoing the means to recover their property and make themselves whole after wrongful government seizures.'” 566 F. Supp. 2d at 1260 (quoting H.R. Rep. No. 106-192, at 11 (1999)). The U.S. House of Representatives Committee on the Judiciary expressed concern that “many civil seizures are not challenged” due to the costs involved in challenging them. H.R. Rep. No. 106-192, at 14 (1999). Similarly, the Committee expressed concern “with the arduous path one must journey [in a civil forfeiture action] against a presumption of guilt, often without the benefit of counsel, and perhaps without any money left after the seizure with which to fight the battle.” Id. (internal quotation marks and citations omitted).

United States v. Certain Real Property, 579 F.3d 1315, 1322 (11th Cir. 2009).

CAFRA’s sponsor, Rep. Henry Hyde, stated “[t]he property owner may exhaust his or her financial assets in attorney’s fees to fight for the return of property.”  Congressional Record for April 11, 2000 at p. H2046-2051.

Congress believed CAFRA’s fee-shifting provisions would entitle successful claimants to fee awards.  “The bill provides that property owners who substantially prevail in court proceedings challenging the seizure of their property will receive reasonable attorney’s fees…. Currently, property owners who successfully challenge the seizure of their property almost never are awarded attorney’s fees.”  Congressional Record for April 11, 2000 at p. H2046-2047 (emphasis added).

The Congressional Budget Office predicted that these provisions would cost the government a substantial amount of revenue, and that passage of CAFRA would rein in the government’s aggressive revenue raising through forfeiting assets from citizens:

Because CBO expects that enacting H.R. 1658 would result in fewer civil seizures by DOJ and the Treasury Department, we estimate that governmental receipts (i.e., revenues) deposited into the Assets Forfeiture Fund and the Treasury Forfeiture Fund would decrease by about $115 million each year beginning in fiscal year 2001.

Congressional Record for April 11, 2000 at p. H2046-2047.

CAFRA did not work as planned.  Forfeiture revenue did not decline.  Instead, law enforcement stepped up its aggressive pursuit of forfeiture revenue, and annual forfeiture revenue skyrocketed from $470 million in 2001 to $6.5 billion in 2013. 1/

CAFRA’s attorney fee provisions also did not function as Congress intended. After an initial boom, prosecutors and the courts found ways to diminish fee awards or even avoid them entirely.

The unravelling began only a year after CAFRA passed, when the Supreme Court decided a case dealing with an entirely different fee-shifting statute.  Even though that case was about something else entirely, prosecutors persuaded the lower courts to twist the reasoning from a footnote in that opinion to create exceptions to all attorney fee awards.  Some of these decisions even gave the prosecutor the power to disqualify a claimant from fee award by the government’s unilateral action.  (More about that later.)

Consequently fee awards – and requests for fee awards – diminished to a trickle.  Once burned by the illusory promise of a fee award, forfeiture defense attorneys were no longer willing to take chances on claimants who had meritorious defenses but lacked the funds to litigate them.  Now, as before CAFRA, claimants who are indigent – or who have too few assets left after the government seizures to pay the entire cost of litigating the case to completion — are often unable to find counsel willing to take the case.  Defense attorneys righfully fear that the client will run out of money and they will be stuck defending the case without pay.

How did this happen?

Congress enacted the fee-shifting provision in CAFRA to attract counsel to represent claimants and “level the playing field,” so claimants have a fair chance of defending their cases — both originated from court decisions interpreting with other fee-shifting statutes.

CAFRA’s attorney’s fee provisions sound very straight-forward:

in any civil proceeding to forfeit property under any provision of Federal law in which the claimant substantially prevails, the United States shall be liable for… reasonable attorney fees and other litigation costs reasonably incurred by the claimant.

28 U.S. Code § 2465(b)(1). The statute has two exceptions: (1) claimants convicted of the triggering crime are not entitled to attorneys’ fees, and (2) if there are multiple claimants to the same property, the government can avoid liability for attorneys’ fees by promptly recognizing the claim, and promptly returning the interest of the claimant after the competing claims are resolved without causing the claimant to incur additional fees – but only if the government prevails in obtaining forfeiture on one or more of the other claims. 28 U.S. Code § 2465(b)(1).

Most people would think that a party who wins most of what they sought in the litigation “substantially prevails.”  Legal dictionaries give a similar definition. “Even if the plaintiff gets much less than the claim, he/she/it is the prevailing party entitled to include attorney’s fees in the collectable costs,” according to Dictionary.law.com.

The government convinced the courts to interpret the phrase “substantially prevail” in a very illogical and narrow way, basing its argument on vague and confusing language from the Supreme Court case, Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, 532 U.S. 598 (2001) (“Buckhannon”). Most lower courts have now adopted the government’s gerrymandered Buckhannon interpretation to deny attorneys’ fees awards.  More about that later.

Another line of authority, culminating in the Supreme Court decision Astrue v. Ratliff, 560 U.S. 586 (2010) interpreted language in another fee-shifting statute as saying the attorney fee award belongs to the client, not the attorney. That may be equitably sound if the client has paid all the attorney’s fees as the case progressed, and just needs to be reimbursed.  But in the usual case, where the attorney has not been paid for some or all of the fees owed, it does not make sense to say the fee award belongs to the client. If the client wins an attorney fee award based on the hard work of his attorney who has not been fully compensated, giving the fee to the client creates a windfall for the client and an inequitable result for the attorney.

The government’s interest in pursuing the theory that the fee award belongs to the client instead of the attorney was not a humanitarian gesture aimed to protect clients from over-reaching defense attorneys; the government’s intent was to grab the attorney’s fee award to pay the client’s debts to the federal government under a statute that allows the federal government to deduct a multitude of debts from any judgments it pays out. [cite statute]

Unfortunately, until the case is over, the defense attorney cannot know whether the case will fall into one of these loopholes.  Even worse, the court rulings creating these exceptions give the forfeiture prosecutor the ability to manipulate the case so that it falls into one of these loopholes, through the government’s unilateral actions.

a.  Buckhannon Board & Care Home, Inc.

Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, 532 U.S. 598 (2001) dealt with a completely different fee shifting statute, in which the litigant had not actually won his case in court.  While his case was pending the legislature amended the statute, curing the problem the litigant sued to change.  He argued he was entitled to attorney’s fees anyway because his case was a catalyst for the legislative reform.  The Supreme Court held that the catalyst theory is not a valid basis for prevailing party status. This is all very straightforward and predictable. However, there was vague language – dicta – that  government lawyers exploited to defeat attorney fee claims.

We have subsequently characterized the Maher opinion as also allowing for an award of attorney’s fees for private settlements. See Farrar v. Hobby, supra, at 111; Hewitt v. Helms, supra, at 760. But this dicta ignores that Maher only “held that fees may be assessed . . . after a case has been settled by the entry of a consent decree.” Evans v. Jeff D., 475 U.S. 717, 720, 89 L. Ed. 2d 747, 106 S. Ct. 1531 (1986). Private settlements do not entail the judicial approval and oversight involved in consent decrees. And federal jurisdiction to enforce a private contractual settlement will often be lacking unless the terms of the agreement are incorporated into the order of dismissal. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 128 L. Ed. 2d 391, 114 S. Ct. 1673 (1994).

Buckhannon, 532 U.S. 598, 604.

Buckhannon is interpreted as prohibiting prevailing party status when the case is settled

The scenario that occurred in Buckhannon – an intervening change in legislation which moots a lawsuit – rarely happens in forfeiture cases.  The Supreme Court was talking about settlements and other kinds of victories short of judgment on the merits only by way of explaining why a result that happens outside the lawsuit itself does not make the litigant a prevailing party.  Nevertheless, this language has been used to bar attorneys’ fee awards even when the result actually occurred in the case itself. This vague language morphed into the principle that if the parties settle the case — even after extended litigation in which the claimant won motions on the merits — the claimant who won some or all of his property back in the case is not a prevailing party, and therefore not entitled to an attorneys’ fee award.

The magic wand of Judicial Imprimatur

Another illogical interpretation of language in Buckhannon resulted in extensive litigation over the meaning of “judicial imprimatur” – judicial oversight — another phrase from Buckhannon.  The Supreme Court had said “[p]rivate settlements do not entail the judicial approval and oversight involved in consent decrees.”

A defendant’s voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change. Our precedents thus counsel against holding that the term “prevailing party” authorizes an award of attorney’s fees without a corresponding alteration in the legal relationship of the parties.

Buckhannon, 532 U.S. 598, 605.

Sometimes courts find specific settlements have enough “judicial imprimatur” to justify attorneys’ fees, but the result varies from court to court.  Another problem with the uncertainty of this boundary is that it generates additional fee litigation.  Any attorney who obtains a fee award will likely have to endure an appeal over the splitting of hairs in the unfortunate test the courts have devised.

There is no sure-fire way of guaranteeing that the court will award attorney’s fees if you settle anything at all, even the damages phase — as happened in a case I litigated for 22 years — six years for the case on the merits, 16 years in fee litigation.  The court of appeals in that case created a special new loophole to make me to lose, so it wouldn’t have to award fees for 22 years of litigation, much of it interest on the past, unpaid fee award.

After Buckhannon, the only way to be certain of entitlement to attorneys’ fees is to litigate all the way to trial and judgment, and never settle. (Certainly Congress did not intend that!) The problem is, judges always try to force the parties to settle, and if you try to resist settling in order to preserve your claim for attorneys’ fees against a Buckhannon challenge, you may alienate the judge and they may take it out on you by cutting your fees.

Congress could fix this by adding a provision to § 2465(b)(1):  “The fact that the parties settled the matter after litigation began shall not deprive them of prevailing party status and the right to attorney’s fees under this statute.”    Allowing the settlement to happen early and still allow the claimant to qualify as a prevailing party will reduce the amount of attorney’s fees the government would have to pay, while serving judicial economy.  (Case law makes it clear that settlements prior to litigation do not make the party a prevailing party – that’s okay, it never happens then, and if it did the attorneys’ fees would be de minimis.)

This provision would also have the positive effect of reducing litigation on fees.  Every time I’ve ever won a fee award the government automatically appealed, even if they were completely in the wrong.  Many such cases involved multiple appeals – including one case in D.C. that had at least 3 appeals and a rehearings, and spanned 22 years – 16 of which were spent in fee litigation.

The “voluntary change in conduct” loophole

The government has created a huge, loophole using this language:  “A defendant’s voluntary change in conduct, although perhaps accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the necessary judicial imprimatur on the change.”  Unfortunately it is a loophole the government can unilaterally create.

In one of my cases, after several years of litigation, the claimants won their suppression motion.  Within hours the government dismissed its forfeiture case, without prejudice, so they could argue  the government’s “voluntary change in conduct” caused the claimant to win the property back.  In reality, the claimant’s litigation leading up to the victory on the suppression motion resulted in the victory in the forfeiture case.

Corrective legislation needs to define “voluntary change in conduct” as being a voluntary dismissal before litigation begins, not on the last hour before the government expects an adverse ruling against them.  Once the government forces the claimant to file motions, it should not be allowed to get out of liability for fees by dismissing.  This new language would have the very positive result of forcing the government to not file cases that are not meritorious.  And if the government later discovers flaws in its case, it will encourage the government to quick cutting of its losses as soon as they realize they are not likely to win, so it can minimize the amount of litigation the defense has to engage in to get a just result.

b. Astrue v. Ratliff

In Astrue v. Ratliff, 560 U.S. 586 (2010), the Supreme Court allowed the federal government to seize an attorney’s fee award that an attorney had fully earned and was still owed, and use it to offset his client’s debts to the federal government. The Supreme Court said this was okay.

We consider whether an award of “fees and other expenses” to a “prevailing party” under § 2412(d) is payable to the litigant or to his attorney. We hold that a § 2412(d) fees award is payable to the litigant and is therefore subject to a Government offset to satisfy a pre-existing debt that the litigant owes the United States.

Astrue v. Ratliff, 560 U.S. 586, 589 (2010).

Imagine that: a do-gooder lawyer takes on an indigent client with a very meritorious case and litigates long and hard to win the property back, then obtains a fee award – finally entitling him to payment after years of litigation – and the government seizes his fee award because his client owes the government back taxes, student loans, hospital bills, child support, or any other of a long list of fees an indigent client could end up owing the federal government (or state government).

Astrue was a nasty slap in the face to all do-gooder attorneys willing to take on the federal government. Fee-award provisions were put there to lure counsel in. Once lawyers are burnt they are not likely to be lured in again.  Who would be willing to take on the cause of an indigent person, no matter how meritorious that cause, if their hard earned fees are stolen by the government and applied against the client’s debts?  This also achieves the opposite of Congress’s intentions in passing the fee-shifting statute – it makes the attorney far less likely to take on the cases of lower income clients because they are more likely to owe the government money.  The kind of background check an attorney would have to put a potential client through to ensure there was no risk of an Astrue fee award seizure would be intrusive and detrimental to the attorney-client relationship.

The government used Astrue on me in United States v. Star Sloop Sailboat “Flash II,” 546 F.3d 26 (2008).  After the court of appeals restored the portion of my fee award that the district judge had cut to punish my client, the government stalled and then refused to pay my fee award, saying they were going use it to offset my client’s alleged tax debts.  Because Astrue was by then pending in the Supreme Court, we waited until the Supreme Court decided Astrue.  After Astrue was decided the government still refused to pay my fee award to me.  I briefed the issue for them, showing CAFRA did not have the language interpreted in Astrue as saying the fee award belonged to the client rather than the attorney.  A year later they were still stalling, so I appealed to my Congresswoman.  Rep. Woolsey’s office was able to convince them to pay me my fee award, and it arrived a few weeks later – 3 years after I won the appeal on my attorney’s fees, when my entitlement to the award was final.

Because of what happened to me, other forfeiture attorneys asked the courts to order the fee awards paid directly to them. Some courts have refused to do that, still holding the fee belongs to the client.

Saying the attorney fee award belongs to the client is a bad interpretation of the law for yet another reason – it gives ideas to unscrupulous clients.  I litigated a case for 11 years on a contingency – including an appeal and a trial — before winning an attorney fee award.  My clients won everything they had asked for plus compound interest on the money owed.  When I filed my petition for attorneys’ fees, the husband of the couple I represented hired a separate lawyer who tried to extort from me a “settlement” giving the clients 1/3 of my fee award (the attorney would get 30% of that) – even after my efforts secured the clients a full judgment for everything they were due plus compound interest for 11 years of litigation. I refused to budge on the extortion demand and they eventually backed down, but it was a nerve-wracking and outrageous experience.  It was especially nasty after I defended their case on a contingency for 11 years — destroying my cash flow.

Congress could fix this by adding a new provision saying “The attorney fee award belongs to the attorney, except to the extent to which the client is entitled to reimbursement for fees already paid, which the attorney shall promptly reimburse.  Fee awards shall be paid directly to the attorney’s trust account, and shall not be subject to any set-off under 31 U.S.C.S. §§ 3711(a) and 3716(a) on account of the client’s debts.”

Since my mistreatment in those cases I describe above, I have not been willing to take a case on the expectation of attorneys’ fees if I win.  That not only rules out indigent claimants, but also clients with modest means but probably not enough to finance the entire case.   I would never have taken on the cases mentioned above in the current climate.

Congress can require the government to set aside a set percentage of its income from forfeitures to pay attorneys’ fees.  This will strike more of a balance and deter the government from bringing cases it is likely to lose, and from prolonging litigation to get an advantage.

c.  Attorneys fees for third party claimants in criminal forfeiture cases

While we are reforming these laws, Congress should extend CAFRA’s attorneys’ fees provisions to third party claimants in criminal forfeiture cases.  There are some court decisions interpreting 28 U.S.C. § 2465’s language “in any civil proceeding to forfeit property under any provision of Federal law” as being broad enough to encompass third parties in criminal forfeiture cases.  After all, the statutes and rules say the third party proceedings are governed by civil procedure and civil rules such as time for filing appeal, etc.  Some courts have rejected that interpretation and deny CAFRA fees for third parties who substantially prevail.

Third parties in criminal forfeiture cases should have the same right to attorney fee reimbursement under the same statute and standards as civil forfeiture litigants.  The government has the option of filing a civil forfeiture case against claimants instead of a criminal forfeiture case against the property of third parties.

The government should not be able to avoid liability for attorneys’ fees by its own unilateral actions or charging decisions.

ENDNOTES:

1/  The actual figures show a total of $470,559,785 in 2001 and $6,477,749,666 in 2013.  This chart, compiled from the annual reports of the Justice and Treasury Departments, shows the figures continue to climb at an alarming rate.

Brenda Grantland

Brenda Grantland is a private attorney in Mill Valley California, with 30 years’ experience primarily in asset forfeiture defense, as well as federal criminal appeals and victims rights and restitution. Brenda handles federal cases throughout the country, and frequently works with other attorneys or legal teams as a consultant or co-counsel.

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