United States Court of Appeals

For the Eighth Circuit

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No. 13-3576

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United States of America

lllllllllllllllllllll Plaintiff - Appellee

v.

Robert Lee Bailey

lllllllllllllllllllll Defendant - Appellant

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Appeal from United States District Court 

for the District of Minnesota - St. Paul

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 Submitted: October 8, 2014

 Filed: December 29, 2014

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Before MURPHY, BYE, and SHEPHERD, Circuit Judges.

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MURPHY, Circuit Judge.

Appellant Robert Lee Bailey settled a damages claim for lost property with the

United States government. He later moved the district court to vacate his settlement

agreement with the United States, arguing that the government had breached the 
contract by administratively offsetting the settlement proceeds against his preexisting

child support obligation. The district court denied his motion to vacate. We affirm.

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The United States had tried Bailey for prostitution related charges in 2004. 

During the trial, Minneapolis police officers took exhibits overnight to a locked

storage facility in the Minneapolis police department. Bailey was convicted and

sentenced. Some items not subject to forfeiture that had been seized from Bailey and

later brought to the department during the trial included $2,036 in cash, a wallet, and

a cell phone. Years later, as Bailey's prison term neared completion, he moved the

district court for return of this property, but the government could not locate it. The

district court denied Bailey's motion. 

This court reversed and remanded for an evidentiary hearing to determine who

last had had custody of the property. United States v. Bailey, 407 Fed. Appx. 74, 75

(8th Cir. 2011). The evidence at the hearing suggested that the property went missing

following its use at trial. Two federal witnesses testified that after the trial

Minneapolis police took the cash to return it to their locked police property room, but

the items were not found by police officers in the ensuing search of the room. 

Bailey moved the district court to convert his motion for return of property

under Federal Rule of Criminal Procedure 41 into an action for damages against the

United States; his motion was denied. Our court reversed and remanded so that

Bailey could pursue a damages action. United States v. Bailey, 700 F.3d 1149, 1153

(8th Cir. 2012). Following remand the government and Bailey entered into a

settlement agreement, and the government agreed to pay Bailey $2,500 as

compensation for the lost property. A settlement agreement was executed on

The Honorable Ann D. Montgomery, United States District Judge for the

1

District of Minnesota, adopting the Report and Recommendation of the Honorable

Arthur J. Boylan, then Chief United States Magistrate Judge for the District of

Minnesota.

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February 5, 2013. It provided that the payment would "be made by a check drawn on

the Treasury of the United States . . . made payable to Robert Bailey" and would be

mailed to the address of his lawyer. 

As it turned out, Bailey had an outstanding child support obligation in the state

of Illinois. On September 28, 2012, the Illinois Department of Healthcare and Family

Services mailed Bailey a notice informing him that he owed past due support in the

amount of $45,956.48. The notice announced the state's "intent to collect this amount

through the federal administrative offset process and by withholding . . . [tax refunds]

or other federal or state payment(s)." The notice cited 31 U.S.C. § 3716, the statute

governing the administrative offset process, and indicated that under the process

"certain federal payments which might otherwise be paid to you will be intercepted

for payment of current and past due support." The notice also advised Bailey of his

rights, such as his ability to have the debt redetermined.

On April 17, 2013, Bailey filed a motion to vacate his settlement agreement

with the United States Attorney's Office. He complained that he had not received the

settlement check. The government responded that the United States Attorney had

requested the United States Treasury to issue the check and was advised that the

$2,500 had been administratively offset against Bailey's child support obligation. See

31 U.S.C. § 3716. Bailey's child support debt of $45,956.48 was thus reduced to

$43,456.48 by the payment. The district court denied the motion to vacate the

settlement agreement. Bailey now appeals. 

Bailey first argues that the government breached the settlement agreement by

not mailing him a check as specified in the agreement. Our review of the district

court's interpretation of a settlement agreement is de novo. Gilbert v. Monsanto Co.,

216 F.3d 695, 700 (8th Cir. 2000). We apply "general rules of contract construction."

Id. (internal quotation marks omitted). The district court concluded that the

government had substantially performed under the contract and noted that Bailey

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received a benefit of $2,500 for his child support debt. Technical noncompliance

with a contract is excused under the doctrine of substantial performance if it results

in an immaterial breach and the other party receives substantially what it bargained

for. 15 Williston on Contracts § 44:52 (4th ed.). 

We conclude that the government did not breachBailey's settlement agreement. 

The application of the funds to his child support obligation resulted in a $2,500

financial benefit to him, albeit not the one he seeks in this appeal. Since Bailey had

been given notice before entering into his settlement that any federal payments he

received were subject to offset, he received what he bargained for under the contract.

Bailey also challenges the government's statutory authority to offset the

proceeds of his settlement against his child support debt. First, he claims that 31

U.S.C. § 3716 does not apply to currency seized by the government, citing In re

Return of Seized Property, No. 11-cv-1091 BTM (RBB), 2011 WL 3759702, at *2

(S.D. Cal. Aug. 23, 2011). This argument is without merit since Bailey now seeks

payment of a settlement amount and not the seized lost currency. Finally, he claims

that the federal government wasrequired to attempt to collect fromBailey on the state

child support claimbefore offsetting it under 31 U.S.C. §§ 3716(a), (h)(1). This issue

was not raised in the district court, and we decline to address it here. See Aaron v.

Target Corp., 357 F.3d 768, 779 (8th Cir. 2004)

 

The order of the district court is affirmed. 

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