Sixth Circuit Announces Criminal Forfeiture Under Fed. R. Crim. P. 32.2(b) Is Mandatory Claims-Processing Rule, Reverses $62.5 Million Money Judgments
by Douglas Ankney
The U.S. Court of Appeals for the Sixth Circuit reversed two money judgments totaling $62.5 million after holding Federal Rule of Criminal Procedure 32.2(b) (“Rule 32.2(b)”) is a mandatory claims-processing rule with which the U.S. District Court for the Eastern District of Kentucky and the Government failed to comply.
John Maddux, Jr., and his wife Christina Carman were convicted of numerous offenses related to a cigarette-trafficking scheme that bypassed governmental taxes. The Government moved for a $34.9 million judgment against Carman in February 2016 and a $45 million judgment against Maddux in July 2016. Both money-judgment motions were fully briefed by July 2016 and were pending prior to their sentencing.
At Maddux and Carman’s sentencing on August 30, 2016, the district court failed to order (or even mention) a money judgment, and the Government did not object to the omission. While both Maddux and Carman’s judgments were entered the following day, neither specifically mentioned a money judgment. Thus, the Government’s motions for money judgments remained pending after Maddux and Carman’s sentences became final, and the Government did not appeal the lack of money judgments in either sentence.
Carman and Maddux’s sentences were affirmed by the Sixth Circuit in 2019. But in January 2017 — after Carman’s sentence became final and her appeal was pending — the district court granted, in part, the Government’s motion and imposed a $17.5 million money judgment against her. Carman separately appealed that judgment. The Sixth Circuit — in a later opinion — held that the district court lacked authority to enter the money judgment once Carman had appealed her sentence. United States v. Carman, 933 F.3d 614 (6th Cir. 2019). The Sixth Circuit vacated the money judgment and remanded. Id.
On remand, the Government renewed its motions for money judgments against Maddux and Carman. Both defendants opposed the motions, arguing the district court lacked authority under Rule 32.2 to modify their sentences long after those sentences had become final. The district court, relying on United States v. Martin, 662 F.3d 301 (4th Cir. 2011), found that “[t]he deadlines in Rule 32.2 are ‘time-related directives’ which are ‘legally enforceable but do not deprive a judge or other public official of the power to take the action to which the deadline applies if the deadline is missed.’” The district court concluded: “While the niceties of Rule 32.2 were not observed, both Defendants had ample notice of the United States’ intention to seek a forfeiture money judgment and were not deprived of the opportunity to be heard in that regard.” The district court imposed a money judgment of $45 million as to Maddux and a money judgment of nearly $17.5 million against Carman. Both defendants appealed.
The Court observed: “A forfeiture order, including a money judgment, is ‘part of the [defendant’s] sentence in the criminal case.’” Libretti v. United States, 516 U.S. 29 (1995). Generally, once a sentence is imposed, a district court may not “change or modify that sentence unless such authority is expressly granted by statute.” United States v. Hammond, 712 F.3d 333 (6th Cir. 2013). “Whenever possible, the court ‘must promptly enter [after guilt is established] a preliminary order of forfeiture setting forth the amount of any money judgment … sufficiently in advance of sentencing to allow the parties to suggest revisions or modifications before the order becomes final as to the defendant’ at sentencing.” Fed. R. Crim. P.32.2(b)(2)(A)-(B), (b)(4)(A). At sentencing, “[t]he court must include the forfeiture when orally announcing the sentence or must otherwise ensure that the defendant knows of the forfeiture.” Fed. R. Crim. P. 32.2(b)(4)(B). Finally, the court “must … include the forfeiture order, directly or by reference, in the judgment.” Id.
In the instant case, the district court relied on Martin wherein the Fourth Circuit — following Dolan v. United States, 560 U.S. 605 (2010) — concluded Fed. R. Crim. P. 32.2(b) is a time-related directive. But the issue in Dolan was whether a restitution deadline in the Mandatory Victims Restitution Act (“MVRA”) requires a district court to hold its restitution hearing within the deadline, and if it fails to do so, what are the consequences?
To answer that question, the U.S. Supreme Court observed that the MVRA provided that if the restitution amount could not be determined prior to sentencing, “the court shall set a date for the final determination of the victim’s losses, not to exceed 90 days after sentencing.” Dolan. But the MVRA is silent as to any consequences if the hearing occurs after the 90-day mark. Therefore, the Supreme Court considered the “statutory language … the relevant context,” and what those two considerations reveal “about the purposes” of a given statutory or rule-based deadline. Id.
The Dolan Court summarized three general categories of deadlines that serve distinctive purposes: (1) jurisdictional deadlines that may not be forfeited and, if missed, prevent a court from permitting or taking action, (2) ordinary claims-processing rules that may be forfeited but “regulate the timing of motions or claims brought before the court,” and (3) deadlines that seek speed by creating a time-related directive that is legally enforceable but does not deprive a judge of the power to take the action to which the deadline applies. The Dolan Court concluded the MVRA deadline is a time-related directive to encourage an order of restitution be made speedily, but if missed, it does not deprive the court of the power to order restitution.
The Court observed in the instant case that “deadlines in court rules are nonjurisdictional,” but they are “enforceable, since they assure relief to a party properly raising them.” For a deadline to assure relief, it may not be ignored when properly invoked; such deadlines are “inflexible” and “unalterable.” Eberhart v. United States, 546 U.S. 12 (2005). Like jurisdictional deadlines, mandatory claims-processing rules bind courts and may not be equitably tolled. Nutraceutical Corp. v. Lambert, 139 S. Ct. 710 (2019). By definition, mandatory claims-processing rules “are not subject to harmless-error analysis.” Manrique v. United States, 137 S. Ct. 1266 (2017). The “critical difference” is, unlike jurisdictional deadlines, “claims-processing rules may be forfeited.” Kontrick v. Ryan, 540 U.S. 443 (2004). Disagreeing with the Fourth Circuit’s holding in Martin, the Sixth Circuit concluded “Rule 32.2’s text, context, and purpose squarely place it in Dolan’s second category, as a mandatory claims-processing rule.”
First, Rule 32.2(b) repeatedly uses the mandatory “must,” directed mostly at the sentencing court, to command each step of the forfeiture process. The Sixth Circuit has previously noted that such language “tends to impose unyielding procedural requirements ‘impervious to judicial discretion.’” United States v. Dowl, 956 F.3d 904 (6th Cir. 2020) (quoting Lexecon Inc v. Milberg Weiss Bershad Hynes + Lerach, 523 U.S. 26 (1998)).
Second, claims-processing rules “regulate the timing of motions brought before the court.” Dolan. The Court stated that it is “hard to imagine a better example of that than Rule 32.2. The rule regulates every stage of the criminal forfeiture process — from requiring forfeiture notice in the indictment, to determining the specific property (or the amount of any money judgment) subject to forfeiture, to issuing a preliminary forfeiture order, to including the forfeiture order in the sentence and the judgment, to litigating third parties’ interests in to-be-forfeited property.”
Third, “Rule 32.2(b)’s undoubtable purpose is to ensure defendants receive due process paired with finality and efficiency,” the Court stated. Rule 32.2(b)(2)(B) — when followed — “arms defendants with procedures to correct preliminary forfeiture orders before sentencing [and] ensures correct final forfeiture orders, which in turn preserves scarce judicial resources.” Rule 32(b) “aims to culminate forfeiture at sentencing; it follows that, once sentencing occurs, defendants can be sure no more forfeiture awaits them — just like they can be sure no other new punishment does.” Greenlaw v. United States, 554 U.S. 237 (2008).
Finally, what Martin failed to grasp was that whereas the MVRA effectively extends Rule 35(a)’s amendment period (as to determining the victim’s losses) to 90 days after sentencing, Rule 32.2(b) does not, the Court stated. Further, “the government’s timely appeal of a preserved Rule 32.2(b) error will allow for corrections as a matter of course, particularly since forfeiture is mandatory.” United States v. Smith, 749 F.3d 465 (6th Cir. 2014). In the instant case, the Court stated that the Government’s failure to appeal was its own fault. And unlike the MVRA’s purpose of restoring a victim’s loss, “the purpose of forfeiture is to punish the defendant by stripping him of unlawful gains.” United States v. Boring, 557 F.3d 707 (6th Cir. 2009).
The Court concluded that the district court failed to include the money judgments in the oral sentences or otherwise ensure that both Maddux and Carman knew it would definitely impose money judgments. By the time their written judgments were entered, that failure became final and the Government’s decision not to cross-appeal was fatal.
Accordingly, the Court reversed the money judgments imposed against Maddux and Carman. See: United States v. Maddux, 37 F.4th 1170 (6th Cir. 2022).
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