U.S. Supreme Court Restricts Challenges To Pretrial Seizure Of Defense Funds

The U.S. Supreme Court recently weakened a criminal defendant's ability to challenge the Government's pretrial seizure of assets that a defendant has allocated for mounting a defense. In Kaley v. United States,1 the Court eliminated a defendant's right to challenge a grand jury's finding of probable cause, which underlies pretrial seizure orders2 to restrain such funds. The Court left intact a defendant's right to challenge whether seized funds are traceable to alleged misconduct.

In this case, a grand jury indicted Kerri and Brian Kaley, a married couple, on charges related to an alleged conspiracy to steal and resell outmoded, surplus prescription medical devices. But the Kaleys learned of the grand jury investigation before the indictment. They hired counsel and began mounting a defense. (The Kaleys continue to maintain that their actions could not amount to a crime and tried to convince the Government not to pursue the case.) To pay their attorney's fees, the Kaleys applied for a $500,000 equity line of credit on their home and used the funds to purchase a certificate of deposit (C.O.D.).

Based on the grand jury's finding of probable cause underlying the indictment, the Government sought a restraining order to freeze the Kaleys' assets. The Government alleged the $500,000 C.O.D. constituted "proceeds" of the alleged crimes, despite the fact that it could trace only $140,000 of the $500,000 back to the alleged criminal activity. The Kaleys challenged any pretrial restraint of the C.O.D. because they needed the funds to pay for counsel of their choice and because they questioned the grand jury's finding of probable cause. The Court granted the Government's restraining order without a hearing.

The Kaleys appealed to the U.S. Court of Appeals for the Eleventh Circuit. Notably, while the Kaleys' appeal was pending, an alleged co-conspirator was tried and acquitted on all charges—suggesting that the Kaleys, too, would be acquitted. But the appellate court affirmed the restraining order. The Kaleys sought and obtained a writ of certiorari from the Supreme Court for further review.

Justice Kagan, writing for the majority, affirmed the restraining order on basis of the Supreme Court's decision in United States v. Monsanto,3 which held that assets may constitutionally be restrained pretrial "whenever there is probable cause to believe that the property is forfeitable."4 While recognizing that this holding would result in denying a defendant the...