In the Courts

As a result of the high volume of sales, the Drug Enforcement Agency (DEA), in conjunction with state and local law enforcement, launched an investigation into the store. They further executed a search warrant and seized its entire inventory of Polar Pure, which included more than 300 bottles. The Honeycutt brothers were indicted by a grand jury for several federal crimes related to their sale of the iodine product while having reason to believe it would be used in the manufacture of methamphetamine.

The Government sought forfeiture of the Honeycutts' profit from their sale of Polar Pure in the amount of $269,751.98. Under 21 U.S.C. § 583, the guilty defendant must forfeit “any proceeds the person obtained, directly or indirectly, as the result of” the drug distribution. After Tony pled guilty and agreed to forfeit $200,000, a jury found Terry guilty of 11 charges, including “conspiring to and knowingly distributing iodine” in violation of federal law.

Next, the government sought the remaining money from Terry in the amount of $69,751.98. The district court did not enter a forfeiture judgment, reasoning that Terry, a salaried employee, did not personally receive any of the profits from the iodine sales. The Sixth Circuit reversed, finding that the brothers were “jointly and severally liable for any proceeds of the conspiracy,” and therefore were both required to satisfy the entire judgment.

In reversing the Sixth Circuit's ruling and resolving the split among circuits, the Supreme Court held that, pursuant to 21 U.S.C. § 583, the government cannot seek forfeiture against a defendant who did not personally acquire the illegal property or proceeds. Specifically, the Court reasoned that the adverbs “directly” and “indirectly” in the statute modify, but do not erase, the verb “obtain.” This clarification necessitates that the defendant actually possess the property or proceeds before forfeiture can occur. Thus, Terry, who did not personally benefit from the sales of the Polar Pure and did not have any ownership interest in his brother's store, could not be required to forfeit the remaining proceeds of almost $70,000. The Court effectively rejected the Sixth Circuit's application of joint and several liability to forfeiture cases, explaining that “the Act's reach does not countenance joint and several liability” as it “would require the forfeiture of untainted property.”

The Court's decision in Honeycutt will likely impact the government's ability to pursue criminal forfeiture from defendants as it is now evident that prosecutors must prove that a defendant actually “obtained” the proceeds before seeking forfeiture of assets.

— Monique Agnes O. Ladeji, Mayer Brown