# U ni te d S ta te s Co ur t of A pp ea ls For the Eig hth Circu it

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No. 1 3- 35 76

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Uni te d S ta te s o f Am eri ca

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el le e

v.

Ro be rt Lee Bai le y

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll an t

__ __ __ __ __ __ App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of M in ne so ta - St. Pa ul

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Su bm it te d: Octo be r 8, 2 01 4 Fil ed : Dec em

be r 29 , 20 14

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Befo re MUR PHY, BYE, and SHEPHERD, Circ ui t J ud ge s.

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MURP HY, Circ ui t J ud ge

.

App el la nt Ro be rt Lee Bai le y se tt le d a da m ag es cl ai m fo r lo st pr op ert y wit h th e Uni te d St at es go ve rn m en t. He la te r m ov ed th e di st ric t co ur t to va cat e hi s se tt le m en t
ag reem en t wi th th e Uni te d S ta te s, ar gu in g t ha t t he go ve rn m en t h ad bre ach ed th eco nt ra ct by ad m in is tra ti ve ly of fs et ti ng th e se tt le m en t pr oc eed s ag ai ns t hi s pr eex is ti ng ch il d su pp or t ob li ga ti on

. The di st ric t co ur t de ni ed hi s m ot io n to va cat e. W e affi rm

. 1

The Uni te d St at es ha d tri ed Bai le y fo r pr os ti tu ti on rel at ed ch arg es in 20 04

. Dur in g th e tri al
, Mi nn eap ol is po li ce of fic ers to ok ex hi bi ts ov ern ig ht to a lo ck ed

st or a g e faci li ty in th e Mi nn eap ol is po li ce de pa rtment. Bai le y was co nv ic te d an d

se nt en ced

. So m e it em s no t su bjec t to fo rfei tu re th at ha d be en se iz ed fro m Bai le y an d
la te r br ou gh t to th e de pa rtment du rin g th e tri al in cl ud ed $2 ,03 6 in cas h, a wall et , an d

a cel l ph on e. Years l a t e r , a s Bai le y 's pr is on te rm ne ared co m pl et io n, he m ov ed th e di st ric t co ur t fo r ret ur n of th is pr op ert y , bu t th e go ve rn m en t co ul d no t lo cat e it

. The
di st ric t co ur t d en ie d B ai le y 's m ot io n.

Thi s co ur t rev ers ed an d rem an de d fo r an ev id en ti ary he ari ng to de te rm in e who
la st ha d ha d cu st od y of th e pr op ert y

. Uni te d St at es v. Bai le y , 40 7 Fed

. App x. 74
, 75 (8 th Ci r. 20 11 ). The ev id en ce at th e he ari ng su gg es te d th at th e pr op ert y wen t m is si ng fo ll owi ng it s us e at tri al

. Two fed eral wit ne ss es te st ifi ed th at af t e r th e tri al
Mi nn eap ol is po li ce to ok th e cas h to ret ur n it to th ei r lo ck ed po li ce pr op ert y ro om , bu t th e it em s wer e n ot fou nd by pol ic e o ffi cers in th e en su in g s earc h o f th e ro om

.

B a il ey m ov ed th e di st ric t co ur t to co nv ert hi s m ot io n fo r ret ur n of pr op ert y

un de r Fed eral Ru le of Cri m in al Pro ced ur e 41 in to an act io n fo r da m ag es ag ai ns t th e Uni te d St at es ; hi s m ot io n was de ni ed

. Our co ur t rev ers ed an d rema n de d so th at Bai le y co ul d pu rs ue a da m ag es act io n. Uni te d St at es v. Bai le y , 70 0 F.3 d 11 49
, 11 53 ( 8t h Ci r. 20 12 ). Fo ll owi ng rem an d th e go ve rn m en t an d Bai le y en te red i n t o a

se tt le m en t ag reem e n t , a n d th e go ve rn m en t ag reed to pa y Bai le y $2 ,50 0 as

co m pe ns at io n fo r th e lo st pr op ert y

. A se tt le m en t ag reem en t was ex ecu te d on

The Hon or ab le Ann D. Mo nt go m ery, Uni te d St at e s Dis tri ct Ju dg e fo r th e 1 Dis tri ct of Mi nn es ot a, ad op ti ng th e Rep or t an d Rec om m en d a t io n of th e Hon or ab le Arth ur J. Bo y la n, th en Ch ie f Uni te d S t a t e s Mag is tra te Ju dg e fo r th e Dis tri ct of Mi nn es ot a.

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-Feb ru ary 5, 20 13

. It pr ov id ed th at th e pa y m en t wou ld "b e m ad e by a ch eck dr awn on

th e Treas ur y

of t he Uni te d S ta te s . . . m ad e pa y ab le to Ro be rt Bai le y " and wou ld be

m ai le d t o t he ad dr es s o f hi s l awy er.

As it tu rn ed ou t, Bai le y ha d an ou ts ta nd in g ch il d su pp or t ob li ga ti on in th e st at e of Ill in oi s. On Sep te m

be r 28
, 20 12
, th e Ill in oi s Dep art m en t of Heal th care an d Fam il y Serv ic es m ai le d Bail ey a no ti ce inf or m in g hi m

th at he owed pa st du e su pp or t in th e

am ou nt of $4 5,9 56 .48

. The no ti ce an no un ced th e st at e's "i nt en t to co ll ect th is am ou nt th ro ug h th e fed eral ad m in is tra ti ve of fs et pr oc es s an d by wit hh ol di ng

. . . [ta x refu nd s]

or ot he r fed eral or st at e pa y m en t(s )." The no ti ce cit ed 31 U.S.C. § 37 16
, th e st at ut e
go ve rn in g th e ad m in is tr a ti ve of fs et pr oc es s, an d in di cat ed th at un de r th e pr oc es s "ce rta in fed eral pa y m en ts whi ch m ig ht ot he rwis e b e p ai d t o you wil l be int erce pt ed
fo r pa y m en t of cu rren t an d pa st du e su pp or t." The no ti ce al so ad vi se d Bail ey of hi s rig ht s, s uc h a s h is ab il it y

to ha ve th e d eb t re de te rm in ed

.

On Apr il 17
, 20 13
, Bai le y fil ed a m ot io n to va cat e h i s s e t tl em en t ag reem en t wit h th e Uni te d St at es Att or ne y 's Offi ce. He co m pl ai ne d th at he ha d no t rece iv ed th e

se tt le m en t ch eck

. The go ve rn men t r e sp on de d th at th e Uni te d St at es Att or ne y ha d

req ue st ed th e Uni te d St at es Treas ur y to is su e th e ch eck an d was ad vi s e d th at th e $2 ,50 0 ha d be en ad m in is tra ti ve ly off se t agai ns t Bai le y 's ch il d su pp or t ob li ga ti on

. See
31 U.S.C. § 3 71 6. Bai le y 's ch il d su pp or t de bt of $4 5,9 56 .48 was th us red uc ed to $4 3,4 56 .48 by th e pa y

m en t. The di st ric t co ur t de ni ed th e m ot io n t o va cat e th e

se tt le m en t ag reem en t. Bai le y no w app eal s.

Bai le y fir st arg ue s th at th e go ve rn m en t br each ed th e se tt le m en t ag reem en t by

no t m ai li n g h i m a c h e ck as sp eci fie d in th e ag reem en t. Our rev ie w of th e di st ric t

co ur t's in te rp ret at io n of a se tt le m en t ag reem en t is de no vo

. Gil be rt v. Mo ns an to Co
., 21 6 F.3 d 69 5, 70 0 (8 th Ci r. 20 00 ). W e ap pl y "g en eral ru le s of co nt ract co ns tru ct io n."
Id

. (in te rn al qu ot at io n m ark s om it te d)

. The di st ric t co ur t co nc lu de d th at th e
go ve rn m en t ha d su bs ta nt ia ll y p erfo rm ed un de r th e co nt ract an d no te d th at Bai le y

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-rece iv ed a be n e f i t of $2 ,50 0 fo r hi s ch il d su pp or t de bt

. Tech ni cal no nc om pl ia nc e wit h a co nt ract is ex cu se d un de r th e do ct rin e of su bs ta nt ia l perf or m an ce if it res ul ts in an im m at eri al bre ach an d t he ot he r pa rty rece iv es su bs ta nt ia ll y wha t i t b arg ai ne d
fo r. 15 W il li st on on Co nt ract s § 44 :5 2 (4 th ed .).

W e co nc lude tha t the gove rn m en t did no t br each Bai le y 's se tt le m en t ag reem en t. The ap pl ic at io n of th e fu nd s to hi s ch il d su pp or t ob li ga ti on res ul te d i n a $2 ,50 0
fin an ci al be ne fit to hi m , al be it no t th e on e he se ek s in th is ap pe al

. Si nc e Bai le y ha d
be en gi ve n no ti ce be fo re en te rin g in to hi s se tt le m en t th at an y fed eral pa y m en ts he

rece iv ed were su bjec t to of fs et , he rece iv ed wha t he ba rg ai ne d fo r un de r th e co nt ract

.

Bai le y al so ch al le ng es th e go ve rn m en t's st at ut or y au t h or it y to of fs et th e
pr o c e e d s o f hi s se tt le m en t ag ai ns t hi s ch il d su pp or t de bt

. Fi rs t, he cl ai m s th at 31
U.S.C. § 37 16 do es no t ap pl y to cu rren cy se iz ed by th e go v ern m en t, ci ti ng In re Ret ur n of Sei zed Pro pe rty, No

. 1 1

- c v- 10 91 BTM (RBB ), 20 11 W L 3 75 97 02 , a t *2 (S.D. Cal

. Aug

. 23
, 20 11 ). Thi s arg um en t is wit ho ut m eri t si nc e Bai l e y n ow se ek s
pa y m en t of a se tt le m en t am ou nt an d no t th e se iz ed lo st cu rren cy

. Fi na ll y , he cl ai m s th at th e fed eral go ve rn m en t was req ui red to at te m pt to co ll ect fro m Bai le y on th e st at e ch il d su pp or t cl ai m be fo re of fs et ti ng it un de r 31 U.S.C. §§ 37 16 (a), (h )(1 ). Thi s is su e

w a s no t rai se d in th e di st ric t co ur t, an d we de cl in e to ad dr es s it he re. See Aaro n v. Targ et Co rp ., 35 7 F .3d 76 8, 7 79 (8t h C ir. 2 00 4)

The ord er o f th e d is tri ct co ur t i s af fir m ed

.

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