Hoosier Banker 47 In a recent 9-0 opinion, the U.S. Supreme Court overturned the Indiana Supreme Court and delivered a ruling that will have profound impact on the rights of criminal defendants and, by extension, their creditors in cases involving asset forfeiture.1 Asset forfeiture is a widely used law enforcement tool that allows law enforcement agencies to seize property, including cars and real estate, used in the commission of a crime or procured with criminal proceeds. Asset forfeiture is a massive source of revenue for prosecutors and law enforcement agencies, accounting for nearly $10 million in 2017 alone in combined state and federal revenue in Indiana. Moreover, because prosecutors frequently hire private attorneys on contingency fee engagements, there often are strong incentives to seize property when possible. Lienholders’ rights frequently are caught up in asset forfeitures, and both federal and state law provide creditors with procedures to follow to recover their equity or the property itself.2 While the Supreme Court’s ruling does not directly impact these procedures, it will have a ripple effect on creditors and their recovery of their interests in seized property. In short, the decision will change the game in ways that are sure to reverberate for years to come. In Timbs v. Indiana, the U.S. Supreme Court considered the case of Tyson Timbs, who was convicted of dealing in a controlled substance and conspiracy to commit theft in 2015. The State of Indiana filed forfeiture to seize a $42,000 Land Rover that Timbs had used to transport the drugs. Overturning the Indiana Supreme Court, a unanimous U.S. Supreme Court held that the Eighth Amendment protection from “excessive fines” applies to state court forfeiture proceedings. This is the first time that the excessive fines provision of the U.S. Constitution has been held to apply in state Landmark Forfeiture Ruling Presents creditors with new uncertainties FEATURE asset forfeiture proceedings. From now on, Indiana courts will have to grapple with the question of whether seizure of a particular asset is “excessive” under the particular circumstances presented. What does this mean for creditors? In the short term, creditors should expect longer, more vigorous litigation by property owners as courts struggle to pin down exactly what constitutes an excessive fine. There likely will be an uptick in successful defenses in forfeiture actions, with more property owners retaining their possession of encumbered property. Issues such as property valuation and its proportionality to the wrongdoing at issue will be frequent subjects of argument. Lawsuits will be longer, and lienholders will be forced to confront additional uncertainty and delay, at least in the short term, when they try to assert their lien rights in seized property. In the medium and long term, banks and other creditors should expect policy changes as law enforcement agencies adjust their practices to conform to the new legal landscape. Proposed legislation has already been introduced in Indiana, and it is reasonable to assume that the Indiana General Assembly will weigh in on the matter. Creditors, as stakeholders in the forfeiture process, should monitor these developments carefully and, whenever possible, weigh in to protect their interests. HB Timothy E. DeLaney Partner Bose McKinney & Evans LLP tdelaney@boselaw.com . Nathan T. Danielson Partner Bose McKinney & Evans LLP ndanielson@boselaw.com Bose, McKinney & Evans LLP is an associate member of the Indiana Bankers Association. This article exists for informational purposes only, and none of its contents should be construed or used as legal advice on any specific facts or circumstances. You should consult with an attorney admitted to practice law in your state regarding your specific legal issues. 1 Timbs v. Indiana, 17-1091, 2019 WL 691578 (U.S. Feb. 20, 2019). 2 See Ind. Code Chapter 34-24-1 (subject to change based upon proposed legislation); 18 U.S.C. § 983.
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