Can Wrongfully Convicted Defendants in the USA Recover Restitution Already Distributed to Victims?

“You can’t give them back whatever time they’ve spent in jail”, but “you can give them the money back”. So stated Chief Justice John Roberts during oral argument of the 2017 Supreme Court case Nelson v Colorado, which held that when “a criminal conviction is invalidated by a reviewing court and no retrial will occur”, the state or government must “refund fees, court costs, and restitution exacted from the defendant”.

Notwithstanding Justice Roberts’ sweeping statement, the scope of the Supreme Court’s ruling came immediately into question. While the majority opinion referred broadly to “fees, court costs and restitution” (emphasis added), Justice Alito’s concurrence objected to this broad language, in particular the inclusion of restitution. Among other concerns, Justice Alito posed a hypothetical scenario in which the restitution had already been paid to victims, suggesting that in such case a refund was not constitutionally required. Subsequent case law, although quite limited, has supported that view. As a result, wrongfully convicted federal defendants face an uncertain battle when trying to recover restitution payments that have been distributed to victims.

The Supreme Court’s recent narrowing of the wire fraud statute

This issue has particular relevance now, in light of recent Supreme Court decisions narrowing the scope of conduct that may be prosecuted under the federal wire fraud statute.

For example, in Ciminelli v United States, the Supreme Court struck down the “right to control” theory, by which a defendant could be convicted of wire fraud for depriving victims of “intangible interests such as the right to control the use of one’s assets”. In Ciminelli, the Court found that the government could only sustain a conviction under the federal wire fraud statute where a defendant had deprived someone of a “traditional property right”.

Another example is Kelly v United States. Petitioners in that case – two former Port Authority employees and then Governor Chris Christie’s former chief of staff – challenged their convictions for involvement in the Bridgegate scandal, in which the defendants caused the closure of traffic lanes on the George Washington Bridge as political payback to the mayor of Fort Lee for not supporting Christie’s reelection campaign. All were convicted under federal fraud statutes, but the Supreme Court reversed these convictions, holding that the defendants “could not have violated the federal-program fraud or wire fraud laws” because the scheme “did not aim to obtain money or property”.

In these decisions, the Supreme Court declared that conduct charged by the government as criminal did not, in fact, amount to a federal crime. In such instances, wrongfully convicted defendants may, quite reasonably, seek a refund of whatever financial penalties they paid, including restitution. While the Supreme Court’s opinion in Nelson would appear to give them support, where the restitution has already been paid to victims most lower courts have held that the defendants may not recover the money.

Nelson and its application

Nelson concerned a Colorado statute that allowed the state to retain the fees, court costs and restitution paid by wrongfully convicted defendants unless they could prove actual innocence through clear and convincing evidence. Colorado argued that because the money was paid pursuant to a then-legal conviction, it became “public funds” that the state need not return. A majority of the Supreme Court disagreed and held that the state had “no legal right to retain” wrongfully convicted defendants’ money, and that such “deprivation of property” would violate the “presumption of innocence” to which all criminal defendants are entitled. The Court concluded that Colorado’s requirement that defendants prove their innocence before getting their money back violated the Due Process Clause of the Fourteenth Amendment.

In his concurrence, Justice Alito concluded that Colorado’s statute was unconstitutional, but did so by a different route, basing his analysis on Supreme Court precedent that looks to “historical practice” when assessing the validity of state criminal procedure laws. Alito then criticised the majority’s “sweeping pronouncement regarding restitution”, arguing that it was both “unnecessary” and misguided. Alito wrote: “[the majority] overlooks important differences between restitution, which is paid to the victims of an offense, and fines and other payments that are kept by the State.” Alito found it “startling” to “insist that a State must provide a refund after enforcing a restitution judgment on the victims’ behalf in reliance on a final judgment that is then vacated on collateral review” (emphasis in original).

In the aftermath of Nelson, lower courts have disagreed about its scope, in part seizing on the distinction identified by Justice Alito as to whether restitution funds had already been released to victims. In United States v Medicine Horn, one federal district court posited that “the restitution funds [in Nelson] had not been disbursed and were still possessed by the State of Colorado”. After concluding that “Nelson did not address” cases in which the restitution had been paid to victims, that court – relying in part on Alito’s concurrence for support – held that in such a case the government need not “refund” the defendant. In United States v Brooks, the Second Circuit also concluded that in Nelson “the restitution was in the control of the state, not the victims”. The Circuit expressly reserved judgement on the issue of whether a wrongfully convicted defendant may recover restitution when it has been distributed to victims.

On the other hand, a California state court recently disagreed, stating in dictum that, although “not expressly addressed in [Nelson], the appealed-from state court opinions make clear that in the consolidated Colorado cases … the restitution funds paid by the defendants had already been paid to the victims”, and that fact did “not alter the high court’s holding that the state was required to repay the defendants”. In fact, the opinions of the Colorado Supreme courts, which were clearly part of the record before the Nelson court, indicate that at least a portion of the restitution in those cases had been paid over to victims, although the majority’s opinion did not explicitly address that fact.

The Ninth Circuit is the only circuit court to have decided this issue, although it did so well before Nelson was decided and did not reach the constitutional issue. In United States v Hayes, the Ninth Circuit held that a wrongfully convicted defendant could not recover his restitution payments, already distributed to victims, reasoning that “the government merely served as an escrow agent pending the final judgment and at the proper time paid the funds over to the victims”. The Circuit proclaimed that the government cannot “return money it no longer has”, and has reaffirmed Hayes as recently as June 2023 (in United States v Washington). Importantly, however, these decisions were decided based on Federal Rule of Criminal Procedure 41(g) and did not explicitly consider whether there is a constitutional right to recover the money.

Arguments to recover restitution that has been paid to victims

Wrongfully convicted defendants can marshal several arguments in support of their effort to recover restitution that has been distributed to victims. First, defendants can argue that Nelson, with its broad language and underlying facts, represents binding precedent that requires the government to repay restitution under any circumstances, even if it has already been paid to victims; Justice Alito certainly read the majority opinion that way. Even within the Ninth Circuit, defendants could argue that Nelson is controlling authority as to the all-important constitutional issue.

Second is fundamental fairness: returning money which the government (and victims) were never truly entitled to is the least a government can do for a wrongfully convicted defendant. As Justice Roberts commented in the oral argument of Nelson, even if the government cannot restore the time that wrongfully convicted defendants spent in jail, at least it “can give them the money back”.

Third, the notion that the government “no longer has the money” is questionable. Money is fungible. As petitioners in Nelson argued during oral argument, in all cases of restitution “the State is spending on something … the State isn’t hiding that money under the mattress”. Therefore, it makes little sense to differentiate between instances where the money was given to victims and instances where the state used the money for any number of other things.

Fourth, even if Nelson is not controlling on this issue, the decision lays the groundwork for arguing that the government still owes the wrongfully convicted defendant a debt even if it “no longer has the money”. This is because once a conviction is vacated, in retrospect, the state never had a legitimate legal right to the money. By rejecting Colorado’s theory that the money became “public funds”, the Supreme Court implicitly recognised that defendants retain a property interest in their money even when it was exacted pursuant to a then-proper conviction. Therefore, as the petitioners in Nelson argued, “it’s no excuse when you owe a debt to say, oh, gees, I’m sorry, I already spent the money on something else”.

While such arguments would face the obstacles presented by the lower court decisions discussed above, wrongly convicted defendants may nevertheless seek refuge in the broad language and principles espoused by Nelson.

 

Written by Douglas R. Jensen and Raphael Friedman.

This article was originally published by Chambers.  A link to the original article may be found here.