In the Courts

Honeycutt v. United States: Supreme Court Rejects Joint and Several Liability in Criminal Forfeiture Case

On June 5, 2017, in a unanimous opinion by Justice Sonya Sotomayor, the United States Supreme Court ruled to narrow the scope of criminal asset forfeiture by restricting the federal government's ability to obtain proceeds from a criminal conspirator who never possessed the criminal proceeds. In doing so, the Court reversed the decision from the U.S. Court of Appeals for the Sixth Circuit, and resolved the split among other federal circuits as to whether co-conspirators could be held jointly and severally liable for asset forfeiture under the Comprehensive Forfeiture Act of 1984 (21 U.S.C. § 583). In the case at issue, Honeycutt v. United States, the court held that forfeiture pursuant to 21 U.S.C. § 583(a)(1) is “limited to the property the defendant himself actually acquired as a result of the crime.”

Terry Honeycutt, a salaried employee, managed sales and inventory at a Tennessee hardware store owned by his brother, Tony Honeycutt. At his hardware store, Tony Honeycutt sold iodine-based water-purification products known as Polar Pure. After noticing several “edgy looking” individuals purchase the water-purification products, Terry Honeycutt asked the local police whether the product could be used to manufacture methamphetamine. An officer confirmed Polar Pure's use in the manufacture of methamphetamine, and advised Terry to stop selling the product if it made him “uncomfortable.” Nonetheless, the Honeycutt brothers continued to sell the product — and Terry and Tony sold as many as 12 bottles in a single transaction to a single customer, even though most people “have no legitimate use for the product in large quantities.” Over three years, “the store grossed roughly $400,000 from the sale of more than 20,000 bottles of Polar Pure.”

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