Divided Supreme Court upholds civil forfeiture reimbursement of law enforcement

The practice of diverting civil forfeiture proceeds away from the Common School Fund to reimburse law enforcement costs is constitutional under Article 8, Section 2 of the Indiana Constitution, the Indiana Supreme Court has ruled, answering the longstanding question of whether the constitution requires all forfeiture proceeds to go to the Common School Fund.

Only two justices, Mark Massa and Christopher Goff, concurred fully with the court’s 54-page opinion, handed down Thursday in Jeana M. Horner, et al. v. Terry R. Curry, et al., 18S-PL-333. Chief Justice Loretta Rush and Justice Geoffrey Slaughter each wrote separately, while Justice Steven David partially joined Rush’s separate opinion. Rush was the only member of the court to dissent from a portion of the 38-page majority opinion.

The court heard arguments in the case in October, https://www.theindianalawyer.com/articles/48499-justices-hear-challenge-to-civil-forfeiture-disbursements hearing from the Virginia-based Institute for Justice, which argued the text of Article 8, Section 2 made diversion of forfeiture proceeds unconstitutional. That constitutional provision holds that “(t)he Common School fund shall consist of … (t)he fund to be derived from … all forfeitures which may accrue … .”

But now-retired Marion Superior Judge Thomas Carroll found in March 2018 that the phrase “all forfeitures which may accrue,” as it was understood at ratification in 1851, did not include civil forfeiture. The justices then granted transfer pursuant to Indiana Appellate Rule 56(A), bypassing the Indiana Court of Appeals.

The case arose under the 2013 seizure of Jeana and Jack Horner’s two vehicles. The Marion County Prosecutor’s Office filed a forfeiture action against the vehicles, though they were eventually returned after the underlying criminal charges were dropped.

At the time of the seizure and forfeiture action, Indiana Code Section 34-24-1-3(a) (2011) allowed the prosecutor to request to offset forfeiture revenue to reimburse law enforcement costs related to the forfeiture action. If that offset was granted, the remaining revenues would be deposited into the Common School Fund.

That statute was amended in 2018 to create a specific formula for disbursing forfeiture proceeds. The percentage-based formula begins with attorney fees and flows through law enforcement before depositing the remaining proceedings into the Common School Fund.

The Horners, suing on behalf of Indiana taxpayers and citizens, challenged both versions of the statute as unconstitutional. But before getting to the merits of the constitutional question, Massa first wrote to address whether taxpayers have standing to bring the case.

In concluding they do, Massa noted taxpayer standing and public standing are two separate doctrines. The court then adopted the standing standard laid out by Justice Frank Sullivan in his concurrence in Embry v. O’Bannon, 798 N.E.2d 157 (Ind. 2003), modified on other grounds by Meredith v. Pency, 984 N.E.2d 1213 (Ind. 2013) — rather than relying on State ex rel. Cittadine v. Indiana Department of Transportation, 790 N.E.2d 978 (Ind. 2003) — and laid out a three-part test to establish taxpayer standing:

1. Plaintiff must seek to vindicate an express constitutional limitation on the expenditure of public funds;

2. Plaintiff must demonstrate a personal stake in the outcome, and;

3. Plaintiff must show “extreme circumstances” for judicial intervention.

Applying that test here, Massa said the taxpayers have taxpayer standing to challenge the diversion of forfeiture proceeds because their challenge implicates a constitutional limit on expenditure of public funds, they have an interest in the Common School Fund, and their substantial question of Indiana constitutional law creates extreme circumstances warranting judicial review.

Turning then to the merits of the case, the court next determined that Article 8, Section 2 does apply to civil forfeitures, contrary to how Carroll ruled in March 2018. In reaching this holding, Massa reviewed case law and statutes dating back to 1789 and determined “that our constitutional framers understood that ‘a conviction on the underlying criminal activity is not a prerequisite for forfeiture.’”

Massa then said there is a long precedent in Indiana of allowing the Legislature to determine how and when money accrues to the Common School Fund. He cited to State v. Elliott, 171 Ind. App. 389, 392, 357 N.E.2d 276, 278 (1976), and language in the 1816 Indiana Constitution to support “the framers’ understanding that, even without express language permitting offset, the legislature can direct when and how forfeiture proceeds ‘accrue’ or ‘inure’ to the state.”

Similarly, the history of the educational fund undercuts the taxpayers’ argument against diversion, Massa said, as do the structure and purpose of the constitution. He cited to Auditor & Treasurer of Grant County v. Board of Commissioners of Grant County, 7 Ind. 315 (1855), which allowed seminaries to use sale proceeds to pay off debts before depositing the remaining proceeds into the Common School Fund. Similarly, State ex. Rel. Attorney General v. Meyer, 63 Ind. 33 (1878), upheld the practice of allowing pre-accrual debt offset for heirless estates, allowing those estates to hold the property for five years, then selling the property and vesting proceeds into the Common School Fund.

“For the reasons set forth above, our Constitution’s structure and purpose refute Taxpayers’ claim that, ‘if the framers had intended that the forfeitures clause authorize cost-reimbursement, they would have said so,’” Massa wrote in conclusion.

“We acknowledge the critical role public schools play in nurturing our children to become productive and law-abiding citizens,” he wrote. “… But should the legislature decide to repeal the Civil Forfeiture Statute entirely, leaving neither the Common School Fund nor law enforcement with an important source of revenue, would that present Taxpayers with a constitutional claim? Would that violate article 8, section 2’s mandate that the Fund ‘shall consist of … all forfeitures which may accrue’? We think the answer to these rhetorical questions is a resounding ‘no.’”

“… Because our constitution’s text, structure, and history clearly show that article 8, section 2 was ‘not self-acting in [its] operation,’ … we hold that the General Assembly may decide how and when forfeiture proceeds accrue to the Common School Fund.”

In a separate opinion, Chief Justice Rush concurred in result as to standing and concurred in full as to the issue of whether Article 8, Section 2 applies to civil forfeitures. But she would hold that the current forfeiture statute is unconstitutional and said the majority’s “broader discussion of the public-standing doctrine — properly characterized as dicta — is imprudent.”

Rush said Cittadine, Embry and Meredith all give the plaintiffs standing as taxpayers, so she “cannot subscribe” to the “lengthy criticism of both the public-standing doctrine and this Court’s precedent” in the lead opinion. David joined in Rush’s opinion on that issue.

As to the constitutionality issue, Rush said her reading of Article 8 Section 2 does allow for offset costs. But “under the current civil-forfeiture statute, any contributions to the Fund are not guaranteed and are capped at ten percent of the collected forfeiture. Without any showing that the allocations are offset costs of obtaining each forfeiture and that those costs serve to grow the Fund, the permissibility of offset costs does not save the statute from constitutional infirmity.”

Slaughter also wrote separately, concurring in the judgment for the defendants and against the plaintiffs. But he reached that result for different reasons than those laid out in Massa’s opinion.

“I would hold that Plaintiffs lack standing under the only standard consistent with our Constitution’s mandate of separate governmental powers,” Slaughter wrote. “In my view, Article 3, Section 1 requires, among other things, that a plaintiff suffer individualized injury in fact and not a generalized harm indistinct from the public at large.”

“… Although I have serious concerns with the way Indiana carries out civil forfeitures … I would not reach the merits of Plaintiffs’ constitutional claim,” he continued. “Instead, I would dismiss their complaint for lack of standing and await another case — brought by the State or by a private party with a concrete, particularized injury — to address the important constitutional questions that this and other civil-forfeiture cases implicate.”