La Spina v. U.S. Attorney's Office

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK LAWRENCE LA SPINA, Plaintiff, - against - 21-cv-1556 (JGK) UNITED STATES ATTORNEY’S OFFICE, FINANCIAL LITIGATION OFFICE, ORDER

Defendant.

JOHN G. KOELTL, District Judge: Because the defendant moved in the alternative for summary judgment, the defendant should provide the plaintiff with a copy of Local Rule 56.2, as well as a copy of Local Rule 56.1, by April 15, 2022. By April 15, 2022, the defendant should also brief the following issues: (1) What is the basis for subject INatter jurisdiction in this case, and is the United States Attorney’s Office a proper defendant? Is there jurisdiction under the Federal Tort Claims Act or the Administrative Procedure Act? Should the plaintiff’s complaint be brought as a motion in the criminal case? (2) Did the restitution order's installment plan expire upon the completion of Mr. La Spina’s supervised release term? (3) Can Mr. La Spina be said to be “delinquent” on his restitution payments, such that his alleged debt can be referred to the Treasury Offset Program {“TOP”’), if he was facially complying with the terms of the installment

plan? See United States v. Taylor, No. 06-cr-658-03, 2021 WL 3051901 (B.D. Pa. July 20, 2021) (finding that the Government exceeded its authority and violated the court’s restitution order when it offset the defendant’s Social Security benefits □

through TOP where the defendant was complying with the terms of

the restitution order); United States v. Hughes, 813 F.3d 1007, 1010-11 (D.c. Cir. 2016) (finding that the use of TOP to offset the defendant’s tax refunds was improper because the defendant

was complying with the terms of the restitution order, and her restitution obligation was therefore not delinquent); see also United States v. Martinez, 812 F.3d 1200, 1205 (10th Cir. 2015) (finding, in context of garnishment proceeding, that “an anstallment-based restitution order does not render the total restitution amount due immediately,” and, therefore, “a defendant subject to an installment-based restitution order need

only make payments at the intervals and in the amounts specified by the order”); United States v. Hughes, 914 F.3d 947, 949 (5th Cir. 2019}, as revised (Feb. 1, 2019), as revised (Feb. 14, 2019) (“When a restitution order specifies an installment plan, unless there is language directing that the funds are also immediately due, the government cannot attempt to enforce the

judgment beyond its plain terms absent a modification of the restitution order or default on the payment plan.”}). But see

Stacy v. United States, No. 19-cr-Ol, 2022 WL 832603 (N.D. Til.

Mar. 21, 2022) (rejecting challenge to administrative offset

even though the criminal defendant appeared to be complying with

the installment plan contained in his restitution order); United

States v. Weissenbach, No. 3:08-cr-i72-1, 2010 WL 2246177, at *2

(W.D.N.C. June 2, 2010) (“TOP offsets are not part of any court

payment schedule, but are instead part of the government’s collection activities. There is no statute that prohibits the

United States from conducting such collection activity once

the restitution order is imposed, even where there is no payment default or where the Court has established a payment schedule.”); Greene v. United States, 124 Fed. Cl. 636, 644

(2015) (“[T]he establishment of a payment schedule does not

preclude the government from undertaking collection activity, such as referral of a debt to the TOP for offset.”). The plaintiff may file any additional evidentiary materials, a response to the defendant's Rule 56.1 Statement, and.a response to the defendant’s additional briefing, by April 29, 2022. The defendant may thereafter reply by May 6, 2022. The

defendant’s motion to dismiss the plaintiff's complaint, and in

the alternative for summary judgment, will then he fully briefed.

“he Clerk’s Office is directed to mail a copy of this

Order, along with its attachments, to the plaintiff’s last known

address and to note service on the docket sheet.

SO ORDERED. on Dated: April 7, 2022 SA /. CAD New York, New York SS “7 Uw be oad John G. Koeltl United States District Judge

Unlted States v. Taylor, Slip Copy (2021) BR RETR OPTI 2 Taylor also moves for the Government to provide 2021 WL 3051901 her with an accounting of her joint and several United States District Court, ED. Pennsylvania. restitution obligation. The Government agrees to provide Taylor with an accounting of restitution UNITED STATES of America currently owed, but it requests at least 120 days v to allow the IRS to verify all payments that it has Constance TAYLOR received that are related to Taylor's joint and several restitution obligation. Gov't Resp. 5, Because the CRIMINAL ACTION 06-658-03 Government has now been on notice of Taylor's request for several months, the Court will order the Filed 07/20/2021 Government to provide Taylor with an accounting Attorneys and Law Firms of restitution currently owed within approximately 90 days from the date of the order granting her Vineet Gauri, Ara B. Gershengorn, U.S. Attorney's Office, motion. Stephen Aaron Miller, Hausfeld LLP, Philadelphia, PA, for USA. I. BACKGROUND On April 24, 2007, a grand jury charged several individuals, including Taylor, with conspiracy to defraud the Internal MEMORANDUM Revenue Service (“IRS”), as well as corruptly endeavoring te obstruct the administration of the tax laws, These Anita B. Brody, District Judge charges stemmed from each individual's involvement in an organization known as the Commonwealth Trust Company *1 The court has the sole statutory authority to determine the (“CTC”), a company that sold domestic and foreign trusts. amount of restitution, the schedule of payments, and whether = CTC advised clients that they could escape paying federal to modify that schedule of payments based on changed — income tax by diverting their income through CTC trusts, and economic circumstances of the defendant. The government —_ instructed clients to transfer assets they already had into these only has the authority to enforce the terms of the courts trusts to protect the assets from TRS liens and seizures. restitution order. On January 28, 2008, a jury found Taylor guilty of one count After consideration of Taylor's economic circumstances— — of conspiracy to defraud the United States, in violation of a statutory requirement—this Court ordered Taylor to pay —1g {),$.C. § 371, and two counts of corruptly endeavoring $100 per year towards her restitution judgment of $3,300,000. tg obstruct and impede the due administration of the Internal Despite Taylor's compliance with the Court's restitution order, —_ Revenue laws, in violation of 18 U.S.C. § 7212(a). The the government began deducting fifteen percent of Taylor's — Coyrt sentenced Taylor to 90 months of imprisonment, Social Security benefits to apply to her restitution judgment. three years of supervised release, a $300 special assessment, Taylor objects to the offset of her benefits and moves for and restitution in the amount of $3,300,000 to the Internal relief from the govermmment's actions to collect restitution. Revenue Service. The Court ruled that Taylor's restitution Because the government exceeded its authority and violated _ obligation was joint and several with her co-defendants. the Court's restitution order when it offset Taylor's benefits, T will grant Taylor's motion for relief. 2 *2 Taylor appealed her conviction and sentence. On November 15, 2011, the Third Circuit affirmed Taylor's conviction and sentence, but vacated the award of restitution ‘Taylor initially filed a pro se letter motion. See ECF . . . . entered against her with the following explanation: No. 1076, On March 22, 2021, the Court appointed Peter D. Hardy, Esq. to represent Taylor in this Under the Mandatory Victims Restitution Act, (MVRA), matter and to provide supplemental briefing. See “la} person sentenced to pay a fine or other monetary ECF No, 1084. penalty, including restitution, shall make such payment immediately untess ... the court provides for payment on a date certain or in installments.” 18 U.S.C. § 3572(d)(1).

Legere ALAR OR OANO Tharssenn Dartare Ain oleim ta arnicinal L1&. Government Vroris.

United States v. Taylor, Slip Copy (2021) 728 Al EFI ORT BIO This statute also mandates that the sentencing order include □□□ thal amount increased [it] will have to file an appropriate a payment schedule in consideration of the defendant's _ petition and {it] will also have to file appropriate evidence ... economic circumstances. See 18 U.S.C. § 3664(f(2), see that an adjustinent would be required.” Hr'g 1/15/12. © United States v. Coates, 178 F.3d 681, 684 (3d Cir. sea The Court memorialized Taylor’s corrected restitution {999). Failure to do so constitutes plain error. FS United sentence in an amended criminal judgment. In the amended States v. Corley, 500 F.3d 210, 227 (3d Cir. 2007). judgment, the Court again ordered Taylor to pay joint and several restitution in the amount of $3,300,000 and indicated: Here, as the Government concedes and App ellant{ ] □ “Payment to begin immediately,” and “The defendant shali Taylor point{s] out, the District Court ordered restitution make payments of $100.00 a year towar ds her restitution.” . in the amount of ... $3,300,000.00 from Appellant Taylor, Am. J. 5, ECF No. 912. Taylor appealed the amended but the record reveals the District Court's failure to take restitution order, On January 16, 2014, the Third Circuit into account [her] financial resources and a failure to state affirmed the Court's restitution order. See United States v. on the record the manner and schedule of payments. The Taylor, 550 F. App'x 135 Gd Cir, 2014). District Court's sentencing orders are also silent on these ° matters, but for the amount of restitution ordered and that *3 In October 2017, the government requested and received restitution is to be made immediately. financial documents from Taylor in order to verify Taylor's It was plain error, therefore, for the District Court to order financial resources and ability to pay restitution. Def.’s Leiter restitution without taking into account ... Taylor's financial Mot. Ex. A; Gov't Resp. 3. Based on its reviews of the resources and without stating, on the record, the manner, information, the government determined that Taylor was able method and schedule of payments. We will, therefore, to pay $25 per month towards her restitution. Def.’s Letter yacate the District Court's order{ ] of restitution ... and Mot, Ex, B; Gov't Resp. 3. Accordingly, in February 2018, remand ... to the District Court so that it may specify the the government presented Taylor with a written payment amount of restitution and the method, manner and schedule agreement for her to sign that would modify her restitution of payments, after taking into account the financial Payment from $100 per year to $25 per month. Def.’s Letter resources of ... Appellant. Mot. Ex. B; Gov't Resp. 3. Taylor did not oppose the modification, but she requested that the government draft an United States v. Crim, 451 F. App'x 196, 210 Gd Cir. order that included the new monthly payment amount for the 5 Court to approve. Def.’s Letter Mot. Ex. C; Gov't Resp. 3. 2011). The government never submitted the proposed modification of Taylor's restitution payment schedule to the Court for 3 The opinion is captioned United States v. Crim approval and Taylor's restitution payment amount remained because it also addressed the appeal of Taylor's co- $100 per year. 4 Gov't Resp. 3. defendant, John Michael Crim. On November 5, 2012, in response to the Third Circuit's 4 Until the filing of Taylor's pending motion, the remand, the Court held a hearing to determine the manner Court was unaware of everything that transpired and method of payments for Taylor's restitution based on between the Government and Taylor in 2017 her ability to pay. At the hearing, the government advocated and 2018. Thus, the Court did not know that for the Court to reinstate restitution in the amount of both parties were in agreement that Taylor was $3,300,000.00 and argued that the Court should only require financially able to pay more towards her restitution, Taylor to pay $100 per year towards her restitution based because the Government never moved to modify on her ability to pay. In doing so, the government pointed Taylor's restitution payment plan. out that if it wished to increase Taylor's payment amount □ □ . - ce . In November 2019, Taylor became eligible to recerve Social post-incarceration it could always take it back up with : □ □ your honor.” Hr'g 11/15/12. Because the government hadn't Security benefits. Prior to becoming eligible for social : . security, the United States Department of Justice □□□□ provided any evidence to support apa yment plan of more than had referred Taylor's restitution judgment to the United States $100 per year, the Court held that “payment of restitirtion 1s cm. $100 per year until further order of the Court.” Hr'g 11/15/12. Department of Treasury (“Treasury Department ) for the The Court also noted that if the government “wishes to have

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United States v. Taylor, Slip Copy (2021) Rod 2027-5280 I

purpose of collecting her debt through the Treasury Offset (6). If properly certified, the Treasury Department must Program (“TOP”). ° administratively offset the debt. See U.S.C. 83716(c) (1){A). On October 30, 2015, the DOJ sent Taylor an 4 Cleveland v. United States, No. 3:13-CV-281, 2020 WL Administrative Offset Notice, informing Taylor eee a that the DOJ intended to refer her restitution 3976940, at *2 (M.D. Pa. July 14, 2020) (quoting Johnson judgment to the Treasury Department for the vy US. Dep't of Treasury, 300 F. App'x 860, 862 (11th purpose of collecting her debt through TOP, Cir, 2008) (footnotes omitted)), Under TOP, Social Security Gov't Surreply Ex. A, ECF No. 1082-1. The benefits are eligible for offset pursuant to the Debt Collection natice explained to Taylor that under TOP, “the Improvement Act.® ee Lockhart v. United States, 546 U.S. Department of Treasury will reduce or withhold bit any of your eligible Federal payments ... by the 142, 145 (2005); see also #31 U.S.C. § 3716(C) GANG). amount of your debt. This ‘offset’ process is authorized by the Debt Collection Act of 1982, as 6 An offset to a person's Social Security benefits, amended by the Debt Collection Improvement Act however, cannot exceed 15% of the monthly of 1996, and the Internal Revenue Code.” Jd. On covered benefit payment. 31 C.E.R. § 285.4(e). March 19, 2016, Taylor's restitution judgment was oo formally added to TOP. Because Taylor's restitution judgment was enrolled in TOP, the Treasury Department automatically deducted fifteen ‘TOP is a federal program authorized by the Debt Collection _ percent (approximately $235 per month) of Taylor's monthly Act of 1982, as amended by the Debt Collection Improvement — Social Security benefits and applied it to her restitution. Act of 1996, which permits the Treasury Department to Taylor continues to comply with the Court's $100 per year collect delinquent debts owed to federal agencies, See restitution payment plan. Thus, on top of the $100 per year U.S.C. § 3716. Under TOP “Congress has subjected to offset that Taylor pays toward restitution, fifteen percent of Taylor's all ‘funds payable by the United States,’ § 3701(a)(1), to Social Security benefits are automatically applied to her an individual who owes certain delinquent federal debts.” _restitution judgment. ’ Astrue v. Ratliff, 560 U.S. 586, 589 (2010). The contours of TOP program have been described in the following terms: The Government notes that “Taylor's restitution judgment currently is not enrolled in TOP to offset “The practice of withholding federal payment in her payments. The government will not enroll the satisfaction of a debt is known as an administrative offset.” debt in TOP pending resolution of this matter.” © Reeves v. Astrue, 526 F.3d 732, 738 n. 3 (1 Eth Cir. 2008), Gov't Resp. Def.’s Sur-Reply Br. 6 n.1. The Debt Collection Improvement Act of 1982, 31 U.S.C. 3701 ef seq., authorizes the Treasury Department “to ‘I, DISCUSSION collect non-tax debts by withholding funds paid out by Because Taylor has complied with this Court's order and . 4, timely made $100 restitution payments each year, Taylor other federal agencies.” Reeves, 526 F.3d at 738 n. 3; contends the TOP offset is improper. Taylor objects to the see 31 U.S.C. $3716(a); °° 31 CER. § 285.5, Pursuant Treasury Department's fifteen percent offset of her monthly to the TOP, any federal agency with a claim against the Social Security benefits because it exceeds the $100 per year debtor, after notifying the debtor that the debt is subject restitution amount that the Court ordered her to pay pursuant to administrative offset and providing an opportunity to ig the Mandatory Victims Restitution Act (CMVRA”). 8 In dispute the debt or make arrangements to pay it, May addition, she argues that TOP cannot apply to her because it collect the debt by administrative offset. See 31U.8.c, _ only applies to delinquent debts and her debt is not delinquent a . because she has been making timely restitution payments. § 3716(a), © (c)(6). In order to do so, the creditor agency —_ Notwithstanding that Taylor has made timely restitution must certify to Treasury that the debt is cligible for . . ' oe payments in accordance with the Court's restitution payment collection by offset and that all due process protections plan, the government argues that Taylor's restitution debt is have been met. See P°31 CER. § 285.5()G)ii, re {d} subject to TOP offset because she has not paid the entire

United States v. Taylor, Slip Copy (2021) Rd ORB nm $3,300,000.00 owed for restitution.’ In the government's 704, imposes no prerequisite of administrative view, the Court's establishment of a payment plan for exhaustion unless it is ‘expressly required by restitution pursuant to the MVRA does not preclude the statute or agency rule.’ The government points to govemment from undertaking a collection action against no statute or rule expressly imposing any such Taylor. requirement.” Hughes, 813 F.3d at 10L0 (D.C. 8 ae Cir, 2015) (quoting Darby v. Cisneros, 509 U.S, In addition, Taylor argues that the offset of her 137, £43 (1993). Social Security benefits violates the Ev Post Facto Additionally, Taylor's motion was properly brought Clause of the United States Constitution. Taylor before this Court because it sentenced Taylor. As bases her argument on the mistaken belief that the explained by the Hughes court: IRS sought to offset her benefits pursuant to the At least under these circumstances, where Firearms Excise Tax Improvement Act of 2010 agency action threatens to thwart the proper —a statute that did not become effective until execution of the collection of restitution ordered August 16, 2010, almost two years after Taylor by a district court criminal sentence, and where was sentenced, However, the IRS did not seek the Department of Justice's purported readings to assess and collect Taylor's restitution. Rather, of the sentence have triggered the actions of the DOJ sought the offset of Taylor's Social Treasury (the overseer of TOP), ... it is hard Security benefits pursuant to the Debt Collection to see why a motion in the sentencing court Act of 1982, as amended by the Debt Collection should not be an “applicable form of legal Improvement Act of 1996, which enables the action.” Indeed, federal courts already have Treasury Department to collect delinquent debts the authority to issue mandamus “in aid of owed to federal agencies. See 31 U.S.C. § their ... jurisdictions,” USC. § 1651{a), 3716(c), Thus, Taylor's offset does not violate an authority that includes power “to issue the Ex Post Facto Clause of the United States teas Constitution. such commands under [*."§ 1651] as may Taylor also objects to the Treasury Department's be necessary or appropriate to effectuate and offset of her Social Security benefits on the basis prevent the frustration of orders [they have] that the offset is a financial hardship. Because the previously issued,” °° United States v. New York offset violates the Court's restitution order it is Telephone Company, 434 U.S. 159, 172 (1977). unnecessary to reach this argument. The power reaches even “persons who, though 9 not parties to the original action or engaged in The government also argues that Taylor cannot wrongdoing, are in a position to frustrate the challenge the offset under TOP because she has implementation of a court order or the proper failed to exhaust her administrative remedies, and administration of justice” and “who have not even if a judicial remedy is permissible, it would taken any affirmative action to hinder justice.” require Taylor to bring a separate civil suit rather eu than filing a motion before the sentencing court. dd, at 174. In | United States v, Hughes, 813 F.3d 1007 (D.C. Cir, 2016), the Court of Appeals for the *5 The MVRA applies to Taylor's conviction and provides District of Columbia appropriately rejected the that “the court shall order restitution to each victim in the game arguments by the government under very full amount of each victim's losses as determined by the court similar circumstances. As in Hughes, Taylor did and without consideration of the economic circumstances of not fail to exhaust administrative remedies because the defendant.” 18 U.S.C. § 3664(O(1)(A). It further directs there were no administrative remedies available that “the court shall, pursuant to section 3572, specify in to Taylor after the government began applying the restitution order the manner in which, and the schedule the offset to her benefits, and “even assuming according to which, the restitution is to be paid.” Ia. $ 3664(H an available administrative remedy, § 10(c) of (2). “{T]he plain language of section 3664(f}—stating that the Administrative Procedure Act, 5 U.S.C, § ‘the court shall’? order restitution and specify the manner

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United States v. Taylor, Slip Copy (2021) 428 T.R.2d 2021-6280 and schedule of payments—means that ordering restitution restitution judgment by garnishing the retirement accounts is a judicial function that cannot be delegated, in whole _— of the defendant because the defendant had complied with or in part.” United States v. Corley, 500 F.3d 210, 225 the court's restitution payment plan). This is because □□□□□□ (3d Cir, 2007), vacated and remanded on other grounds, government has statutory authority to enforce only the terms bees of a restitution order, not to take an enforcement action U.S. 303 (2009); see also 5 United States v. Lessner, that would exceed a restitution order's payment terms.” il 498 F.3d 185, 201 Gd Cir, 2007) (“The district court's ~.. obligation to comply with § 3664(#)(2} may not be delegated Martinez, 812 F.3d at 1207. to the probation office.”). Thus, it is the court alone and not the government who possesses the statutory authority to 10 The government cites many cases to support order restitution and establish a payment plan for restitution. its contention that it has the authority to enroll United States v. Martinez, 312 F.3d 1200, 1206 (10th Cir. Taylor's restitution obligation in TOP. These 2015) (“[T]he statutory scheme directs the district court, not cases, however, focus on legally distinguishable the government, to direct how and when the defendant is to restitution orders that either (1) made the full satisfy a restitution order.”). ammount of restitution due immediately, regardless of backup payment plan; (2) implemented a When determining a schedule of payments, the MVRA directs payment plan that only set a minimum amount that the court to consider “the financial resources,” “projected had to be paid with each installment but did not earnings,” and “financial obligations” of the defendant. 18 set a maximum amount, potentially implying that U.S.C. § 3664(1)(2)(A)-(C). Itis plain error for a court to order restitution was due immediately; or (3) explicitly full restitution without establishing on the record the manner permitted collection beyond the amount specified and schedule of payments after taking into consideration the in the payment plan, See, eg. United States ce vy. Wykoff, 839 F.3d 581, 582 (7th Cir, 2016) defendant's financial resources. Lessner, 493 F.3d at 201; (affirming the district court's issuance of a writ of Crim, 451 F. App'x at 219. garnishment to collect on a restitution judgment that provided for payment in full immediately and “When a restitution order specifies an installment plan, unless as backup required the defendant to pay a minimum there is language directing that the funds are also immediately of 10% percent of his monthly income while on due, the government cannot attempt to enforce the judgment supervised release); Greene v. United States, 124 beyond its plain terms absent a modification of the restitution Fed. Cl. 636, 644 (Fed, CL. 2015) (upholding IRS order or default on the payment plan.” © United States v. ane vit imposing oe Hughes, 914 F.3d 947, 949 (Sth Cir. 2019), as revised (Feb. . . : . . : 1, 2019), as revised (Feb, 14, 2019), Courts that have ordered prow! ded that it wes due fall immediately, and oe . that if it was not paid immediately, it was ‘payable a defendant to pay restitution according to a payment plan Le and have not ordered the entire amount of restitution to be ona schedule’ ”);' United States v. Shusterman, paid immediately, have routinely held that the government 331 F. App'x 994, 997 (3d Cir. 2009) (affirming may not collect on the full amount of restitution owed the district court's issuance of a writ of garnishment when a defendant is in full compliance with the payment to collect on a restitution judgment that provided plan. 19 See, eg., i Hughes, 914 F.3d at 949 (rejecting the in the event the entire restitution not paid government's attempt to collect the full restitution amount before the commencement of supervision, {the because it “conflicts with the installment-based directive in defendant] shall pay monthly installments of not tess than $250.00”). “Courts have almost uniformly [the defendant's] original judgment”); © “United States v. recognized a ‘crucial distinction’ between cases Hughes, 843 F.3d 1007, 1010-11 (D.C. Cir, 2016) (rejecting like Martinez, in which the court orders the the government's attempt to use TOP offset to collect on the defendant to pay only through a payment schedule restitution judgment because the defendant had complied with with no requirement of immediate payment in the court's restitution payment plan); Martinez, 812 F.3d full, and cases like ... Shusterman, in which the at 1207 (rejecting the government's attempt to collect on the judgment specifies that the amount owed is due in full on the date of judgment, regardless of

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United States v. Taylor, Slip Copy (2021) RETR 30 D001 BBO ee

whether the judgment includes a back-up schedule provides that the full payment of restitution is not due of payments to cover any unpaid amounts.” United immediately if a court establishes a payment pian for States Williams, 88 F3d 1052, 1055 (10th Cit restitution, See Martinez, 812 F.3d at 1205. Thus, “a 201 8), Given this “crucial distinction, the cases defendant subject to an installment-based restitution order cited by the government do nothing to buttress need only make payments at the intervals and in the amounts us argument that it may undertake a collection specified by the order.” /d. Section 3572 also explicitly action against Taylor for her failure to pay the full defines when a payment of restitution is delinquent or in amount of restitution owed when the Court issued ge fault. See 18 U.S.C. § 3572(h}(i). A “payment of restitution an installment-based restitution order that ‘Taylor is delinquent if a payment is more than 30 days late,” fd. § has complied with and did not require Taylor to 3572(h). A “payment of restitution is in default if a payment immediately pay in full. is delinquent for more than 90 days. Notwithstanding any il While “{a]n order of restitution may be enforced installment schedule, when a fine or payment of restitution is by the United States ... by all ... available and in default, the entire amount of the fine or restitution is due reasonable means,” 18 U.S.C. § 3664(m)(1)(A), the within 30 days after notification of the default.” Jd. § 3572G). government may not alter the restitution order. These provisions “would be unnecessary, even meaningless, if the total restitution amount were already owed in full under *§ In this case, the Third Circuit vacated Taylor's original ez restitution judgment because this Court ordered Taylor an installment-based restitution order.” «Martinez, 812 F.3d to pay the full amount of restitution without considering at 1205, It is evident from the structure and language of § Taylor's financial resources and without stating the manner 3572 that under an installment-based restitution order, the and schedule of payments es Crim, 451 FE App’ at restitution debt only becomes delinquent when a defendant's 210. Following the Third Circuit's instructions, the Court installment payment is more than 30 days late, determined at resentencing that Taylor's fimancial resources only enabled her to pay $100 per year and that she should 12 The treasury regulation that governs administrative begin making her payments immediately. Despite the Third offsets pursuant to “31 usc. § 3716 further explicit directive that this Court was statutorily supports that an instailment-based restitution debt obligated to consider Taylor's financial resources when does not become delinquent until after a defendant fashioning her restitution sentence, the government now seeks misses an installment payment. The treasury to use TOP to greatly increase the amount Taylor must pay regulation provides: “Delinquent or past-due re fers toward her restitution without any consideration of her ability to the status of a debt and means a debt has to pay. The government, however, “[can]}not usurp the district not been paid by the date specified in the court's role by enforcing payments not yet due under the agency's initial written demand for payment, or court-ordered payment schedule.” © ° Martinez, 812 F.3d at applicable agreement or instrument (including 1206. Not only does the government's use of TOP conflict a post-delinquency payment agreement), unless with the terms of the restitution order, it also conflicts with other payment arrangements satisfactory to the the statutory scheme, See © id. at 1207, creditor agency have been made.” "31 CER. § 285.5(b). In this case, the applicable instrument “(Ujnlike a civil judgment, the restitution ordet is the product —the restitution order—requires Taylor to pay of a ‘specific and detailed [statutory] scheme addressing $100 per year towards her restitution and does not the issuance ... of restitution orders arising out of criminal require any additional payment. Because Taylor prosecutions.’ ” ld at 1264 (quoting re United States has timely paid her installment each ves her Wyss, 744 F.3d 1214, 1217 (kOth Cir. 2014)). Section restitution debt is not delinquent. See |” Hughes, 3572(d) states that “[a] person sentenced to pay a fine or 813 F.3d at 1010-11 (finding TOP inapplicable other monetary penalty, including restitution, shall make to the defendant's restitution debt because debt such payment immediately, unless, in the interest of justice, was not delinquent under Treasury regulations the court provides for payment on a date certain or in given that the restitution order only required installments.” 18 U.S.C. § 3572(d)(1). This subsection the defendant to “start paying money when the Blackhawk fine is resolved, and, in any case, would

United States v. Taylor, Slip Copy (2021) ERS OSB only be delinquent if [the defendant] paid less than Cognizant of the Court's ability to adjust Taylor's payment $50 per month”). schedule, the government acknowledged at sentencing that The Debt Collection Improvement Act provides: “Any if it wished to increase Taylor's payment amount it could Federal agency that is owed by a person a past due, legally always “take it back up with your honor.” Hg L1S/12, enforceable nontax debt that is over 120 days delinquent ... The Court confirmed that if the government “wishes to have shall notify the Secretary of the Treasury of all such nontax that amount increased fit] will have to file an appropriate tg petition and [it] will also have to file appropriate evidence ... debts for purposes of administrative offset..." 31U.S.C.A. that an adjustment would be’ required.” Hr'g 11 15/12. In § 3716(c\(6)(A). Thus, under TOP “Congress has subjected to October 2017, the government received financial information offset all ‘funds payable by the United States,’ §3701{a)(1),t0 from Taylor that it believed established that Taylor had the an individual who owes certain delinquent federal debts.” 13 ability to pay more towards her restitution. Accordingly, Astrue v. Ratliff, 560 U.S. 586, 589 (2010) (emphasis the government presented Taylor with a written payment added). agreement for her to sign that would modify her restitution payment from $100 per year to $25 per month. 14 ty February 13 . . 2018, Taylor informed the government that she did not oppose The government relies on a Department of Justice the proposed modification of her restitution order, but she DOM") regulation to argue that Taylor's restitution requested that the government submit a modification order ta debt is subject to collection under TOP because It 1s . □ : the Court for approval. The government never submitted the past due. The DOI regulation P rovides: “Judgment proposed modification of Taylor's payment schedule to the debts remain past due untif paid in full.” 28 CPR. □ ous § 11.11(b). While it is true that “a sentence that Court for approval and Taylor's restitution installment plan oy . remained $100 per year. imposes an order of restitution is a final judgment,” 18 U.S.C. § 3664(0), the DOJ regulations is i4 immaterial because Treasury cannot collect on any The Installment Payment Plan that the government debt under TOP that is not delinquent. sought to enter with Taylor not only increased , Taylor's payment plan, it also required Taylor to The government seeks to collect on Taylor's restitution “« . agree[ | that, in addition to the payments due under □ judgment because she has not paid her total amount owed this agreement, the United States Attomey shall in restitution —$3,300,000.00. The government advocated refer the debt to the U.S. Department of ‘Treasury at resentencing, however, that Taylor should only pay for inclusion in the Treasury Offset Program.” $100 per year towards her restitution based on her ability ; : . Def.’s Reply Ex. B. to pay. Following the government's recommendation, the Court issued an installment-based restitution order that only *8 Although the government was aware of its ability to required Taylor to pay $100 per year towards restitution, Tequest modification of Taylor's restitution order payment Because Taylor has tirnely made her restitution payments, her plan, and even had the consent of Taylor to do so in 2018, restitution debt is not delinquent, and the government cannot the government chose not to move under § 3664(k) to seek use TOP to collect on her debt. such a modification from the Court. Instead, the government removed the Court from the decision by enrolling Taylor's Although the government may not use TOP to collect _-Testitution debt in TOP and deducting fifteen percent of additional money from Taylor to apply towards her restitution ‘Taylor's monthly social security benefits to apply it to her obligation, it is not without recourse. A district court retains restitution. In effect, the government impermissibly increased jurisdiction to adjust the method and manner of payment Taylor's restitution payment plan without authorization from of a restitution order. 18 U.S.C. § 3664(k), (0). When a the Court in violation of the restitution order, court receives notification of “any material change in the defendant's economic circumstances that might affect the Though the government may believe that it is in the best defendant's ability to pay restitution ..., the court may, on its position to determine whether Taylor should pay more own motion, or the motion of any party ... adjust the payment towards her restitution, Congress vested this authority in the schedule, or require payment in full, as the interests of justice courts. In doing so, it mandated that a court must consider require.” Id, § 3664(4). the defendant's economic circumstances in fashioning and

United States v. Taylor, Slip Copy (2021) REF RT □□□ modifying the manner and method of payment for a restitution Reintegration, Rsch. & Evaluation Ct, Jobn Jay College of order, Crim, Just., Aug. 2014, at 9; see also Martin, supra, at 9 (“For some formerly incarcerated individuals, these [legal financial It makes sense that a court should consider a defendant's obligations] ... motivate[e] further criminal invoivement.”). ability to pay. As the Senate Committee on the Judiciary recognized in considering the MVRA, “a significant number Here, Taylor asserts that she became unemployed on March of defendants required to pay restitution under this act will be al, 2020 because of COVID-19 and that her only source of indigent at the time of sentencing .... making it unlikely that income is her Social Security benefits. Def. ’s Letter Mot. 3. they will be able to make significant payments on a restitution A fifteen percent reduction in her Social Security benefits has payment schedule.” S, Rep. No. 104-179, at 21 (1995). caused Taylor “financial and emotional distress as [she] is not able to meet [her] financial obligations.” Jd. As Taylor The “vast majority of criminal defendants are poor... aptly argues, “T have very Poor credit and shouldn't have to And approximately eighty percent of cri minal defendants go into debt to pay a debt, especially when I am not in arrears, ate sufficiently indigent to qualify for court-appointe d had not defaulted, and consistently paid the amount ordered counsel.” Abby Shafroth et al, Nat'l Consumer L. Ctr, by this Court to be paid.” /@. The Court agrees with Taylor's Confronting Criminal Justice Debt: A Guide For Litigation assessment and will grant her motion for relief. Is 5 (2016), Moreover, “people who have been incarcerated are significantly burdened by multiple types of debt.” Annie 15 The Court makes no factual findings as to Harper et al., Debt, Incarceration, and Re-entry: a Scoping Taylor's ability to pay her restitution. The $100 Review, 46 Am. J. Crim. Just. 250, 268 (2021). A large portion yearly installment-based restitution order remains of this debt stems from legal financial obligations incurred as in force. Of course, the government is always a direct result of involvement in the criminal justice system, free to seek a modification of Taylor's restitution including restitution, criminal fines, court fees, incarceration payment plan pursuant to 18 U S.C, § 3664(). charges, and fees for post-release supervision. Jd. at 251. “For many, criminal justice debt can ... trigger a cascade □□□ CONCLUSION of debilitating consequences....” Karin D. Martin et al., *9 | will grant Taylor's motion for relief and declare the Nat'l Inst. of Just., U.S. Dep't of Just., Shackled to Debi: collection of restitution pursuant to’ the offset of Taylor's Criminal Justice Financial Cbligations and the Barriers Social Security benefits through TOP to be in contravention to Re-Entry They Create, New Thinking in Community of the Court's restitution judgment. I will also order the Corrections, Jan. 2017, at 9. As formerly incarcerated government to return to Taylor all fun ds taken by the individuals struggle to pay their legal financial obligations, 1G they “experience economic hardship and financial strain, face government by offset of Taylor's Social Security benefits. challenges in finding employment and housing after release, _ are burdened by on-going, long-term indebtedness, and their 16 Additionally, I will order the government to family networks are also burdened, which causes tension in provide Taylor with an accounting of restitution relationships.” Harper, supra, at 268. Importantly, a major currently owed. consequence of these financial burdens is their tendency to increase a person's risk of recidivism, particularly when All Citations the individual is unable to pay. Douglas N. Evans, The Debt Penalty—Exposing the Financial Barriers to Offender Slip Copy, 2021 WL 3051901, 128 ALR T.R.2d 2021-5280

i en _ _ _ _ End of Document 2022 Thomson Reuters, No claim to original U.S. Government Works.

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U.S. v. Weissenbach, Not Reported tn F.Supp.2d (2010)

In accordance with the MVRA, Defendant was ordered to 2010 WL 2246177 pay restitution to the Internal Revenue Service in the amount Only the Westlaw citation is currently available. of $127,348.09, representing his unpaid taxes, as well as an assessment of $100.00. Defendant's sentence included This decision was reviewed by West editorial no active prison sentence and Defendant was ordered to staff and not assigned editorial enhancements. pay $50.00 per month toward his debt, According to the records maintained by the Clerk of Court, Defendant has United States District Court, W.D. North Carolina, paid the $100.00 assessment and $48,879.35 of the restitution Charlotte Division. obligation. $78,568.74 remains outstanding, subject to any payments that have been collected recently, but which have UNITED STATES of America not yet been entered into the relevant accounting system. Vv. Mark WEISSENBACH. According to the response submitted by the United States on May 27, 2010, the government entered Defendant's obligation Criminal No. 3:08CR172—1. into the Treasury Offset Program (“TOP”) database so that any funds paid by the government, such as tax refunds or June 2, 2010. . . . . Social Security payments, could be used in whole or in part Attorneys and Law Firms to pay Defendant's remaining restitution debt. It appears from the parties' filings that Defendant's TOP offset from his Social David Alan Brown, Sr., U.S, Attorney's Office, Charlotte, Security benefits is $271.35 per month, which represents NC, for United States of America. $255.35 in restitution paid to the Clerk's Office, as well as a $16.00 processing fee deducted by Treasury for each payment collected. ORDER Defendant's letter to the Court represented Defendant's FRANK D. WHITNEY, District Judge. financial condition as being difficult, due to personal health <1 THIS MATTER is before the Court on Defendant's issues and expenses related to his criminal supervision. . Other than the letter to the Court, Defendant submitted pro se motion, submitted in the form ofa letter to the Court no documentation or legal authority in support of his filed May 27, 2010, regarding his restitution. Specifically, request. The government provided documentation regarding Defendant app ears to be seeking relief from the United States’ assets available to Defendant, including annual income of collection activities regarding the restitution debt set forth in approximately $29,000 annually, vehicles, a boat, and an the criminal judgment in this matter. For the reasons stated interest in a 3,300 square foot residence which is jointly titled below, the Court will deny Defendant's request. with his girlfriend, who has her own sources of income.

I. PROCEDURAL HISTORY IL ANALYSIS The criminal judgment was entered in this matter on October while Defendant requests relief from the offset of his Social 30, 2009. Defendant pleaded guilty to one count of tax Security benefits, he has provided the Court with no authority evasion related to unreported income of $609,364.52 for tax evidence to support such a request. As provided in the years 2002 through 2006, D ning these years, Defendant government's response, Social Security payments are subject reported himself as disabled in his tax retums, but was ™ to TOP offset pursuant to the Debt Collection Improvement fact working as a bookie for a company based in Costa Rica, act of 1996, See 31 U.S.C. § 3701 ef seg. Such offsets are earning between $66,000 and $207,000 annually. Because not unlimited, but it appears that the government's offset in Defendant was sentenced after April 24, 1996, the Mandatory this matter complies with the statutory requirements in that it Victim Restitution Act (MVRA) applies. See P18 U.S.C. § does not exceed 15% of Defendant's benefit. See 31 □□□□□□ 3663A and 3664. 285.4(e).

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U.S. v. Weissenbach, Not Reported in F.Supp.2d (2010)

*2 Nor does there appear to be authority for the Court to prohibit the government from offsetting Defendant's Social Security benefit so jong as the statutory requirements are While a schedule of $150 per month met, even assuming he was suffering the financial hardships was put in place in the event claimed in his letter. While the Court does have the authority restitution was not paid immediately, to adjust payment schedules pursuant to 18 U.S.C. § 3664(k), the existence of this schedule does not TOP offsets are not part of any court payment schedule, mean that the government is precluded but are instead part of the government's collection activities. from pursuing other avenues of There is no statute that prohibits the United States from ensuring that defendant's restitution conducting such collection activity once the restitution order obligation is satisfied. Court-imposed is imposed, even where there is no payment default or where payment schedules are merely one the Court has established a payment schedule. 18 U.S.C. § means available to enforce a restitution 3613 provides that: judgment.

The United States may enforce Beds . ©" United States vy. James, 312 FSupp.2d 802, 806-07 a judgment imposing a fine [or _. restitution! ] in accordance with the (B.D. Va.2004). See also |. United States v. Hanhardt, 2004 practices and procedures for the WI, 3104827, *1 (N.D.IIL)(following the reasoning of the enforcement of a civil judgment James court). These decisions are consistent with the statutory under Federal law or State law. requirement for prompt payment of restitution to victims set Notwithstanding any other Federal law forth in 18 U.S.C. § 3664A(f). (including section 207 of the Social Security Act), a judgment imposing Although Defendant claims financial hardship, this is not a fine may be enforced against an appropriate line of inquiry in this matter, statutorily or all property or rights to property otherwise. Congress duly promulgated a statutory system that of the person fined .. [except for provides for a limit to the amount that may be offset. In certain exemptions, none of which are this case, the government is limited to collecting 15% of relevant in this matter] Defendant's Social Security benefit. This percentage is part of a calculation that exempts the amounts calculated to be reasonably necessary to meet a person's individual monthly living expenses. No inquiry into Defendant's individual needs 18 U.S.C. § 3613¢f) provides that “all provisions is provided for by statute. Even if Defendant's financial of this section are available to the United States for circumstances were a permissible topic for judicial review the enforcement of an order of restitution.” of the government's collection activities, it appears from “Enforcement of restitution may begin imme diately after the submissions to the Court that Defendant is suffering no . . ' financial hardship, As such, the Court also declines to alter an entry of judgment arises on a defendant's property” and restitution is generally to be paid immediately unless the the minimum monthly payment of $50.00 as set forth in the se criminal judgment absent the submission of credible evidence judge orders deferral. □□ United States Hanhardit, 2004 fram Defendant. WL 3104827, *1 (N.D.LL\citing 18 U.S.C. § 3613(c), which provides the lien in the favor of the United States “arises on the entry of judgment,” and United States v. Delacruz, 2004 U.S.App. LEXIS 18900, *3). Ili. ORDER

*3 IT IS, THEREFORE, ORDERED that Defendant's Even where the judge has deferred payment, the United States motion to reduce the TOP offset of his Social Security benefit still has the right to immediate restitution. is DENIED.

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U.S. v. Weissenbach, Not Reported in F.Supp.2d (2040)

IT iS FURTHER ORDERED that Defendant's monthly payment amount as set forth in the criminal judgment shall All Citations not be reduced absent the submission of credible evidence of need as set forth in! 18 U.S.C. §§ 3663A and 3664. Not Reported in F-Supp.24, 2010 WL 2246177 ae et I A I End of Dacument © 2022 Thomson Reuters. Na claim to original U.S. Government Works.

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Stacy v. United States, Slip Copy (2022) concluded. This is truly unfortunate, as earlier awareness 2022 WL 832603 of this important information might have saved a lot of the Only the Westlaw citation is currently available. parties’ time and effort. United States District Court, N.D. Illinois, Eastern Division. Stacy has filed a motion asking the Court to find that his FTCA suit settlement is not subject to an administrative Andrew STACY, Plaintiff, offset. For the reasons stated below, the Court denies Stacy's Vv. motion. UNITED STATES of America, Defendant. Case Nous C301 Discussion Signed 03/21/2022 The Court first addresses its jurisdiction to rule on this issue. A party may sue the United States only in cases where Attorneys and Law Firms Congress has waived its sovereign immunity. The FTCA Kenneth A. Nazarian, James A. Karamanis, Barney & provides one such waiver, allowing the United States to be Karamanis LLP, Chicago, IL, for Plaintiff. held liable “under circumstances where the United States, ifa private person, would be liable to the claimant in accordance AUSA, Craig Arthur Oswald, David Harold DeCelles, Sarah with the law of the place where the act or omission occurred.” Fattahi Terman, United States Attorney's Office, Valerie re 28 US.C. § 1346(b\1), This waiver is what allowed Rebecca Raedy, United States District Court for the Northem — gi, cy to bring his tort suit against the government. But, with District of IL, Chicago, IL, for Defendant. respect to his current motion, the government contends that the FTCA does not authorize suits against “the United States to enjoin an administrative offset” and thus that the Court MEMORANDUM OPINION AND ORDER lacks jurisdiction to address Stacy's request. Resp. at 3. MATTHEW F. KENNELLY, District Judge: bows The Court disagrees, | Section 1346(c) states that the *1 In December 2014, Andrew Stacy pled guilty to one jurisdiction conferred by the FTCA “includes jurisdiction count of bank fraud and was ordered to pay restitution to of any set-off, counterclaim, or other claim or demand: the victims of the crime in the amount of $1,495,689.60. whatever on the part of the United States against any plaintiff The United States registered the judgment with the Treasury . , tee commencing an action under” the FTCA. 28 U.S.C. § Offset Program, a Department of Treasury program that helps 1346(c) (emphasis added). This section, contrary to the collect delinquent debts owed to federal agencies. Under , the program, the U.S, Treasury withholds fan ds that would government's contention, is written broadly and includes all : . Lye cases, like this case, where the United States claims a set-off otherwise be paid to an individual by a federal agency and instead applies the funds as a credit to the individual's federal against an FTCA plaintiff. See F Johnson v. United States, debts. No. 13 C 2839, 2018 WL 5919475, at *1—2 (N.D. HL Nov. 7, 2018). Following his two-year incarceration, Stacy sued the United States under the Federal Tort Claims Act (FTCA), alleging Having determined that it has jurisdiction to address Stacy's that Bureau of Prisons employees were negligent in failing motion, the Court proceeds to do so. Under 31 U.S.C, § to timely approve and perform needed medical treatment. 3728(a), the Treasury “shall withhold paying that part ofa. The parties settled the case for $70,000. During settlement judgment against the United States Government presented to negotiations, the United States indicated that the settlement the [Treasury] that is equal to a debt the plaintiff owes the was subject to administrative offset and that, instead of paying Government.” Additionally, sections 3711 and 3716 state that, it out to Stacy, it would apply the proceeds to his criminal “with respect to claims of the United States for money or restitution debts. Evidently this was not known to either side's property arising out of the activities of, or referred to, the counsel throughout the litigation until a settlement had been agency,” “the head of an executive, judicial, or legislative

Stacy v. United States, Slip Copy (2022)

agency may collect the claim by administrative offset.” 31 significantly with respect to the question before the Court in US.C. 8§ 3711(), ve 3716(a). These statutory provisions Stacy's case, the court in Johnson relied upon the fact that suggest that the government has the authority to assert an the restitution judgment stated that the amounts were “due offset against a party who owes criminal restitution. immediately.” Jd, For these reasons, the court held that the plaintiff's settlement was subject to offset by the government. *2, Stacy argues that these statutory provisions do not apply oo. □□□ for several reasons. First, Stacy argues that his criminal Stacy's case 1s similar to Johnson. The judge in his criminal restitution is not a “debt that [he] owes the Government”; case entered a judgment stating that that his monetary rather, he contends, he owes restitution to the victims of penalties were “due immediately.” Dkt. nO. 90-1 at □ The his crime. But Stacy does not cite any authority for his court reiterated this in the “special instructions” section of contention, and cases from other circusts undermine his the order, stating that “[tJhe financial obligations are due argument. For example, the Eighth Circuit has held that immediately from any non-exempt assets.” Jd. Although order of restitution ... is based on the victim's losses, the court provided Stacy with 2 payment plan, that simply but it is an obligation owed to the government.” United provided a schedule for payment in the event that he could not States Whitheck, 869 F3d 618, 620 (8th Cir. 2017). make the entire payment in fall. This is clear from the court's Similarly, an Eastern District of Arkansas court, in rejecting use of the phrases “Otherwise” and “Any balance remaining the very argument that Stacy makes, found that the plaintiff's upon release....” See id. Nothing in the court's fanguage restitution debt was owed to the government. Simpson-E1 suggests that the P ayment plan superseded his obligation to United States, No. 2:12-cv-00004-SWW, 2015 U.S. Dist, P*Y "stitution “immediately.” See ia LEXIS 160789, at *4 (E.D. Ark. Dec. 1, 2015). Although restitution is for the benefit of the crime victims, it is payable Next, Stacy contends that, under the government's to the government, which collects the payment an 4 then interpretation, “every single inmate [who owes restitution] distributes it to the victims. For these reasons, the Court finds would be deprived of the right to an attorney to represent them that Stacy's restitution is a debt owed to the government. in their cases” because any potential settlement or judgment from such cases would be used to pay down the restitution Second, Stacy argues that the sections do not apply because amount, instead of attorney's fees or court costs. Mem. at 4. he is current on his restitution payments. He compares his Stacy further argues that this lack of recourse would allow situation to that of the plaintiff in Simpson-E/. In that case, the P mson staff'to “mistreat, abuse, neglect, and otherwise ignore” court found that the plaintiff's debt was not past due, noting inmates with restitution judgm ents “without regard for the that: repercussions.” Jd. This is a serious and plausible argument, Unfortunately, however, the Court lacks the authority to The restitution schedule provided for “[playment of not ignore or rewrite the statute to take Stacy's point into account. less than 10% of the funds deposited each month into the ‘If @ statute represents bad policy, it is up to Congress, inmate's trust fund account and monthly installments ofnot aot the courts, to change it. See Pe Nat'l Fed'n of indep. less than 5% of the defendant's monthly gross household Bus. y, Sebelius, 567 U.S. 519, 538 (2012). The Court also income over a period of 3 years, to commence 30 days after notes that a federal prisoner in this situation likely has an release from imprisonment to a term of supervision.” available remedy for injunctive relief to prevent ongoing Id, at *6, Because the plaintiff was current on his payments, violations of his constitutional rights. See MeCarty □□ Pitzer, the court concluded that administrative offset was not No. 96-2301, 1997 WL 225869, at *3 (7th Cir, Apt. 30, 1997) appropriate. In a similar case, the D.C. Circuit held that an (unpublished), administrative offset was not available where the plaintiff was . ket *3 Lastly, Stacy argues that the statutes cited by the not delinquent in her restitution obligations. ©“ Unifed States government do not apply to cases involving criminal v Hughes, 813 F.3d 1007, 1011 (D.C. Cir, 2016). restitution because “[c]riminal restitution is governed by 18 U.S.C. § 3664, which allows the Court, and not any In contrast, the government argues that this case is like administrative agency, to control criminal restitution.” Reply Johnson, in which the court found that the plaintiffs at3, Stacy contends that the government's interpretation gives restitution was due immediately and thus the debt was the Treasury the power to “amend, alter, compromise, or delinquent, Johnson, 2018 WL 5919475, at *3, Most discharge the restitution debt owed by Plaintiff,” which, he

Stacy v, United States, Slip Copy (2022)

contends, is in direct violation of 18 U.S.C. § 3664(c). Jd. at 4. insurance subrogation cases where an insured plaintiff sues But 18 U.S.C, § 3664 does not prohibit the government from the tortfeasor for damages and receives a judgment in which collecting criminal restitution through administrative offset. the plaintiff's insurance company shares due to its earlier In fact, the provision states that “[a]n order of restitution may payment of the p laintiff's medical expenses. /d. The insurance be enforced by the United States ... by all other availableand = COMPANY must contribute to the attorney's fees when: (1) “the reasonable means.” {8 U.S.C. § 3664(m)(1)(A) (emphasis fund was created as a result of legal services the attorney added). performed”; (2) “the subrogee (e.g., an insurance company) did not participate in the creation of the fund”; and (3) “the For these reasons, the Court finds that Stacy's settlement is subrogee benefited or will benefit from the fund's creation.” subject to administrative offset. Id.

Even if the setttement award is subject to an offset, Stacy But cases involving subrogor-subrogee relationships are argues, his attorneys should still be paid under the principles different from Cases like the one before the Court. In the of quantum meruit. Quantum meruit “is based on the implied situation just described, the plaintift ts “obligated to pay the promise of a recipient of services to pay for those services that subrogee only in the event and to the extent that any net are of value to it and lies where the recipient would be unjustly recovery is made.” Powell v. Inghram, 117 Il, App. 34899, enriched if it were able to retain the services without paying 899, 453 NE.2d 1163, 1166 (1983). Because the insurance ‘em company would have received nothing ifnot for the attorney's for them.” ©. Restore Constr. Co. v. Bd. of Educ. of Proviso services, the recovery amounts to a benefit to the insurance Twp. High Schs. Dist. 209, 2020 IL 125133, 928, 164.N.E.3d — company—one that the insurance company ought to help pay 1238, 1245. Stacy's argument is that his lawyers’ services for, In Stacy's case, however, he is a debtor who is “obligated provided a benefit in the form of a settlement that satisfies tg pay a debt out of any resources available,” regardless of of part of his restitution and that the government should not whether he recovers anything in a subsequent lawsuit. Id. get this benefit for free. The problem, however, is that the Thus the creditor (here, the government) does not benefit government made no implied promise to Stacy's attorneys t0 from the services of the obligor's attorney in the same way pay for their services. The Court also notes that Stacy himself ag a subrogee, because the creditor would have been entitled benefits in the settlement—though perhaps not in the wayhe — tg payment regardless. For this reason, the common ‘fund hoped-—by getting a credit against his restitution obligation. doctrine does not apply in creditor-debtor cases like this one. Lastly, the Court addresses whether Ilinois’ common fand Wendling, 242 Ill. 2d at 265, 950 N.E.2d at 648 (“Tilinais doctrine mandates payment of attomey's fees in this case. courts have never applied the common fund doctrine to a (Stacy did not make this argument, but the Court considers creditor-debtor relationship....”). it for purposes of completeness.) Under this doctrine, “a litigant or a lawyer who recovers a common fund for the of persons other than himself or his client is entitled Conclusion to a reasonable attorney's fee from the fund as a whole.” "Wendling v. S. Il. Hosp. Servs., 242 Ill. 2d 261, 263, 950 *4 For the foregoing reasons, the Court denies the □□□□□□□□□ 646, 648 (2011) (citation and internal quotationmarks en challenge an administrative offset [dkt. no. 90} , . The Court assumes that this resolves the last remaiming issue omitted), The theory here—similar to Stacy's quantum meruit in the case and that the case may now be dismissed with argument—is that the government (and the crime victims) rejudice pursuant to the previously agreed-upon settlement. obtained via the settlement a fund available for payment of pe . P . P The parties are directed to file a status report by March 24, Stacy's restitution. 2022 advising whether this is so, and if not, what remains to The Illinois common fund doctrine is most commonly be done to bring the case to a conclusion. applied “to protect{ | attomeys dealing with nonparticipating insurance companies.” a Wajnberg v. Wunglueck, 2011 All Citations IL App Qd) 110190, § 18, 963 N.E.2d 1077, 684. For Slip Copy, 2022 WL 832603 example, Illinois courts have held that the doctrine apples in

Stacy v. United States, Slip Copy (2022)

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