Court Opinion

ID: 4276114
Source: CourtListenerOpinion
Date Created: 2018-05-17 16:00:29.160441+00
Date Added: 2024-06-11T13:07:51.691375
License: Public Domain

FILED
                                                                    United States Court of Appeals
                                                                            Tenth Circuit
                                        PUBLISH
                                                                           May 17, 2018
                      UNITED STATES COURT OF APPEALS
                                                                        Elisabeth A. Shumaker
                                                                            Clerk of Court
                             FOR THE TENTH CIRCUIT
                         _________________________________

UNITED STATES OF AMERICA,

      Plaintiff - Appellee,

v.                                                             No. 17-8035

SHAKEEL KAHN,

      Defendant - Appellant.
                      _________________________________

                     Appeal from the United States District Court
                             for the District of Wyoming
                          (D.C. No. 2:17-CR-00029-ABJ-1)
                       _________________________________

Megan L. Hayes, Laramie, Wyoming, for Defendant-Appellant.

Stephanie Hambrick, Assistant United States Attorney (John R. Green, United States
Attorney, District of Wyoming, with her on the brief), Casper, Wyoming, for Plaintiff-
Appellee.
                        _________________________________

Before HARTZ, McKAY, and MORITZ, Circuit Judges.
                  _________________________________

HARTZ, Circuit Judge.
                         _________________________________

       Defendant Shakeel Kahn seeks a district-court hearing to challenge the seizure of

assets that he contends are necessary for him to retain an attorney to represent him in his

upcoming criminal trial. The district court denied a hearing because he has some

unseized assets with which to pay an attorney. We reverse and remand because the
proper test is whether he has sufficient unseized assets to pay for the reasonable cost of

obtaining counsel of his choice.

       In January 2017 a grand jury in the United States District Court for the District of

Wyoming returned a 21-count indictment against Kahn (who is a physician) and others

charging distribution of controlled substances and money laundering. The indictment

included a criminal forfeiture count under 21 U.S.C. § 853, which listed a number of his

assets that the grand jury identified as fruits of the alleged crimes. Most of those assets

had been seized by the government before filing the indictment. Two weeks after the

indictment, Kahn moved for a hearing to challenge the seizure of $1,140,699.95 in

currency and bank accounts. He asserted that he needed this money to retain private

counsel of his choice, noting that his only unseized assets were a $175,000 home

encumbered by an $80,000 lien and a business that brought in less than $3,000 a month

after taxes. He estimated that he would need at least $200,000 to pay counsel and that his

total defense costs would be at least $450,000.

       In April the district court denied the motion. The court recognized that the case is

not a simple one—it had granted the government’s motion to declare the case complex

for purposes of the Speedy Trial Act—but it declined to consider whether Kahn’s

unseized assets were sufficient to retain counsel of his choice. It interpreted this court’s

opinion in United States v. Jones, 160 F.3d 641 (10th Cir. 1998), as requiring such a

pretrial hearing only if (1) the defendant has no assets with which to pay an attorney and

(2) there is good reason to believe that the grand jury erred in finding that the seized

assets are traceable to the alleged crime. Under that interpretation of the first

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requirement, the court needed to determine only whether a defendant had any assets

remaining after seizure, not whether those assets would be sufficient to cover the cost of

his defense. See R., Vol. 1 at 425–26 (“It is possible that the cost of defense is an

inherent factor of the Jones test, but this Court will not consider the cost of defense as a

factor in the Jones test without any supporting authority to do so or instruction from the

Tenth Circuit to do so.”). Because Kahn still had some unencumbered assets, the court

held that he had failed to make the showing necessary to obtain a hearing. It therefore

did not consider whether the assets had been properly tied to his alleged offenses.

        Kahn filed a timely interlocutory appeal and obtained a stay of the proceedings.

We have jurisdiction under the collateral-order doctrine. See id. at 644. We clarify our

holding in Jones, and reverse and remand for further proceedings. A hearing on a pretrial

challenge to the seizure of assets is not barred under the first prong of the Jones test just

because the defendant has some unseized assets. The test is whether the defendant lacks

sufficient unseized assets to pay for the reasonable cost of counsel of choice.

       I.     DISCUSSION

       Jones is this court’s leading precedent governing pretrial challenges by criminal

defendants to the seizure of assets allegedly necessary to pay for an attorney. In that case

the defendant had been indicted for health-care fraud. See Jones, 160 F.3d at 643. The

indictment included a count alleging that certain assets were subject to forfeiture and the

government invoked § 853(e)(1)(A) to freeze these assets pending trial, based solely on

the indictment. See id. The defendant moved for a pretrial hearing to challenge the

seizure so that some of the assets could be used for legal and living expenses. See id.

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The district court denied the motion. It held that a defendant was not owed a hearing

under either § 853 or the Fifth Amendment’s Due Process Clause. See id. at 644. We

reversed, concluding that the seizure of a defendant’s assets without affording the

defendant a pretrial hearing could violate due process. See id. at 649.

       The Due Process Clause forbids the federal government from depriving a person

of life, liberty, or property without due process of law. U.S. Const. amend. V. To assess

its application in this context, Jones employed the balancing test in Mathews v. Eldridge,

424 U.S. 319, 335 (1976). See Jones, 160 F.3d at 645. Under the Mathews approach a

court must consider the “private interest affected by the restraint; the risk of an erroneous

deprivation of that interest through the procedures used, as well as the probable value of

an adversarial hearing; and the government’s interest, including the administrative burden

that an adversarial hearing would impose.” Id.

       We identified two important interests of the defendant: a property right and a right

to counsel. Both parties in Jones acknowledged that “a restraining order issued under

section 853(e)(1)(A) deprives one of property even though the assets named in the

indictment are only frozen and may eventually be returned.” Id. The defendant had a

significant interest in “paying for ordinary and necessary living expenses (food, shelter,

and the like) until the conclusion of her trial.” Id. at 646. “A restraining order that

prevents a defendant from supporting herself and her family pending and during trial

would likely work an injustice with constitutional implications.” Id.

       In addition, the defendant had an essential interest in the Sixth Amendment’s

“qualified right to counsel of choice.” Id. The right to counsel of choice “stems from a

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defendant’s right to decide what kind of defense he wishes to present, for the selection of

one attorney over another can profoundly affect the course and outcome of trial.” Id.

(citation and internal quotation marks omitted). “To improperly impede this interest

would likely work a permanent deprivation on a defendant—a defendant needs the

attorney now if the attorney is to do him any good.” Id. (internal quotation marks

omitted).

       We also noted the significant risk of erroneous deprivation under the procedures

set forth in § 853(e)(1)(A)—in particular, reliance on an indictment to establish that

property is forfeitable. See id. at 646. As we explained: “The nature of grand jury

proceedings makes that finding susceptible to error.” Id. “A grand jury investigation is

not an adversarial process,” and “potential indictees have no ability to correct inadvertent

or deliberate distortions during the grand jury’s fact-finding process.” Id. And although

the defendant could ultimately prevail at trial and get back her seized assets, that would

be too late to help her during the litigation of her case. See id. The risk of improper

deprivation, however, would be diminished by a pretrial adversarial hearing. See id.

       As for the government’s interest, we did not find particularly significant the

government’s purported interests in avoiding premature disclosure of its case and the

preservation of prosecutorial resources, but we recognized that the government has an

important interest in assuring “that funds illegally obtained are not laundered or secreted

between the time a defendant is indicted and the time when his criminality is determined

by actual conviction.” Id. at 647 (internal quotation marks omitted).

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       We then weighed these interests and concluded that the “proper balance of private

and government interests requires a post-restraint, pre-trial hearing but only upon a

properly supported motion by a defendant.” Id. Because a hearing cannot be justified if

the defendant has no pressing need for the seized assets or if the assets were properly

seized, a defendant must (1) “demonstrate to the court’s satisfaction that she has no

assets, other than those restrained, with which to retain private counsel and provide for

herself and her family,” and (2) “make a prima facie showing of a bona fide reason to

believe the grand jury erred in determining that the restrained assets constitute or are

derived, directly or indirectly, from gross proceeds traceable to the commission of the

[crime charged].” Id. (brackets and internal quotation marks omitted). “Once a

defendant satisfies these initial burdens, due process requires a district court to conduct

an adversarial hearing at which the government must establish probable cause to believe

that the restrained assets are traceable to the underlying offense.” Id.

       This case turns on the first of Jones’s two requirements. The district court relied

on our language that the defendant must show that he has “no assets, other than those

restrained, with which to retain private counsel and provide for herself and her family.”

Id. Because Kahn indisputably had some equity in his Arizona home and a business that

provided about $3,000 a month, the district court concluded that he was not entitled to a

hearing.

       We can hardly fault the district court for following that language in our Jones

opinion. But that was not the only place in the opinion where we set forth the due-

process requirement. At the end of the opinion we stated: “[W]e conclude that due

                                              6
process requires a district court to conduct a post-restraint, pre-trial hearing before

continuing to freeze assets if a defendant needs the assets for reasonable legal and living

expenses and makes a prima facie showing that the grand jury erred in determining the

assets are traceable to the underlying offense.” Id. at 649. Our two formulations of the

test can be reconciled by reading an implicit reasonableness requirement into the test

relied on by the district court. In other words, when we said “no [unrestrained] assets . . .

to retain private counsel,” id. at 647, it was to be understood that we meant no

unrestrained assets sufficient to reasonably be able to retain counsel of choice. With this

understanding, we need not choose between the two expressions of the standard set forth

in Jones.

       This reading captures the reasoning of the Jones opinion. Given the explanation in

Jones of the importance to a criminal defendant of having counsel of his choice (to say

nothing of having enough money to provide food, clothing, and shelter to his family), we

cannot believe that the Jones panel thought that a defendant can be denied a hearing

simply because he possessed, say, $5,000 in assets, regardless of his family’s basic needs

or the complexity of the charges against him. The issue instead must be whether the

unseized assets are adequate to provide “for reasonable legal and living expenses.” Id. at

649. If not, a hearing is justified upon a prima facie showing that seized assets are not

traceable to the charged offense.

       Our post-Jones precedents are not to the contrary. The government points to

United States v. Gordon, 710 F.3d 1124, 1138 (10th Cir. 2013), which quoted the

language in Jones relied on by the district court in this case. But there was no real

                                              7
question about whether the defendant in Gordon lacked funds for his defense. In that

case the defendant was appealing his conviction and argued that the seizure of funds had

deprived him of his Sixth Amendment right to counsel. See id. at 1135–40. The district

court, however, had found that the defendant had paid his defense attorney $900,000 in

fees and expenses, and we noted that the attorney had fully represented him throughout

trial. See id. at 1138–39. Our ground for affirming the conviction was not that the

defendant possessed some unseized assets; rather, it was because his assets were so

substantial that there was no indication his defense had been materially impaired by the

seizure of assets. See id. at 1138–40; see also United States v. Gordon, 657 F. App’x

773, 776–79 (10th Cir. 2016), cert. denied, 137 S. Ct. 1113 (2017) (rejecting defendant’s

habeas claim on essentially the same ground).

       For similar reasons, our decision in United States v. Clark, 717 F.3d 790, 799

(10th Cir. 2013), does not support the government’s position. In Clark the government

placed a caveat on the defendant’s home and restricted his other financial activities,

including his ability to liquidate some stock holdings. See id. The defendant complained

on appeal that he had been unable to pay for counsel with his business earnings or by

obtaining a loan on his house. See id. Because he had not challenged the seizure in

district court, we reviewed his claim only for plain error. See id. at 802. We rejected the

challenge for several reasons. The only one relevant to this appeal is that the defendant

had failed to show prejudice to his right to counsel. See id. at 802–04. In particular, we

did not deny the claim on the ground that the defendant had some unseized assets. See id.

                                             8
       Nor have other circuit courts adopted a stringent some-assets standard. Although

they have not all adopted identical language, in general they require only that the

defendant show that his unrestrained assets are insufficient to retain counsel of choice or

to otherwise conduct his defense. See, e.g., United States v. Bonventre, 720 F.3d 126,

131 (2d Cir. 2013) (defendant had only the “minimal” burden of showing that he lacks

“sufficient alternative, unrestrained assets to fund counsel of choice”); United States v.

Farmer, 274 F.3d 800, 804 (4th Cir. 2001) (defendant must “show a bona fide need to

utilize seized assets to conduct his defense” (brackets, ellipsis, and internal

quotation marks omitted)); United States v. Moya-Gomez, 860 F.2d 706, 730 (7th Cir.

1988) (to obtain a hearing, defendant must show only “a bona fide need to utilize assets

subject to the restraining order to conduct his defense”).

       Thus, we reverse and remand to the district court to reconsider Kahn’s request for

a hearing under the Jones two-part test as construed in this opinion. That is, Kahn should

be granted a hearing if he can (1) demonstrate to the district court’s satisfaction that he

has insufficient unseized assets to afford reasonable representation by counsel of his

choice and (2) make a “prima facie showing of a bona fide reason to believe the grand

jury erred in determining that the restrained assets constitute or are derived, directly or

indirectly, from gross proceeds traceable to the commission of the offense.” Jones, 160

F.3d at 647 (internal quotation marks omitted).

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       II.    CONCLUSION

       We REVERSE the district court’s order and REMAND for further proceedings

consistent with this opinion.

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