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United States v. Ganos

United States District Court, E.D. Wisconsin

May 2, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
BRIAN GANOS, MARK F. SPINDLER, SONAG COMPANY INC., and NUVO CONSTRUCTION COMPANY, INC., Defendants.

         ORDER DENYING DEFENDANT BRIAN L. GANOS AND SONAG COMPANY, INC.'S MOTION TO STAY THE PRETRIAL RESTRAINING ORDER AND STAY ALL PROCEEDINGS PENDING APPEAL OF THE PRETRIAL RESTRAINING ORDER (DKT. NO. 125), DECLINING TO RULE ON DEFENDANT BRIAN L. GANOS AND SONAG COMPANY, INC.'S MOTION TO STRIKE ASSETS FROM BILL OF PARTICULARS PENDING GUIDANCE FROM THE SEVENTH CIRCUIT (DKT. NO. 125), AND DENYING DEFENDANT BRIAN L. GANOS AND SONAG COMPANY, INC.'S MOTION TO SUPPLEMENT THE RECORD (DKT. NO. 129)

          HON. PAMELA PEPPER UNITED STATES DISTRICT JUDGE.

         On March 1, 2019, the court granted the government's ex parte application under 18 U.S.C. §853(e)(1)(A) (dkt. no. 113) for a post-indictment restraining order requiring defendants Sonag Company and Brian Ganos to escrow all future payments that Sonag Company receives for the sale of its interest in Sonag Ready Mix, and to account for the installment payments received to date. Dkt. No. 115. Before it signed the restraining order, the court tentatively set aside time on its calendar, assuming that one or both defendants would request a post-restraint hearing like the one described in United States v. Moya-Gomez, 860 F.2d 706, 727 (7th Cir. 1988) (limiting the post-restraint hearing to those cases “where the defendant presents a bona fide need to utilize assets subject to the restraining order to conduct his defense”). The court did not end up using that reserved time; two weeks passed and the court heard nothing from the defendants-they did not object to the entry of the restraining order or request a hearing. Instead, on March 14, 2019, they filed a notice of appeal, citing 28 U.S.C. §1292(a)(1), United States v. Kirschenbaum, 156 F.3d 784, 788 (7th Cir. 1998) (finding the restraining order and the district court's refusal to vacate it to be immediately appealable) and the collateral order doctrine. Dkt. No. 118.

         Another week passed before Sonag and Ganos filed the current motion to stay the pretrial restraining order and all proceedings pending appeal of the pretrial order. Dkt. No. 125. They simultaneously moved to strike the Sonag Ready Mix (“SRM”) proceeds from the list of assets alleged to be “fruits or instrumentalities” in the bill of particulars. Id. They since have filed a motion to supplement the record with the government's second bill of particulars and their motion to stay (both filed after they filed the notice of appeal appeal). Dkt. No. 129.

         Trial is scheduled to begin July 8, 2019.

         I. Motion to Stay the Pretrial Restraining Order and All Proceedings Pending Appeal (Dkt. No. 125)

         Sonag and Ganos ask the court to stay the pretrial restraining order and ask for “a stay of the proceedings to preserve the status quo pending” their appeal. Dkt. No. 131. That ask the court to stay all proceedings in the case “until there has been a final ruling from the Court of Appeals, ” arguing that if the court does not stay proceedings, they will “suffer severe financial consequences and will be unable to pay upcoming fees due to current counsel.” Id. at 12.

         A. Standard for Granting a Stay Pending Appeal

         While the defendants do not mention it in their motion, Federal Rule of Appellate Procedure 8(a) allows a district court to stay an order or suspend an injunction during the pendency of an appeal. In considering whether to issue a stay, courts consider factors such as (1) likelihood of success on the merits; (2) the risk of irreparable injury; (3) the potential for injury to interested parties; and (4) the public interest. Hilton v. Braunskill, 481 U.S. 770, 776 (1987). 1. Likelihood of Success on the Merits The court must first consider the likelihood that the defendants will succeed on the merits of their appeal of the court's grant of the restraining order. The court suspects that the government may argue on appeal that the defendants forfeited their challenge by failing to object to the injunction or to request a post-restraint adversary hearing. Although they assert in their motion to stay that the injunction will affect their ability to retain counsel of their choice, the defendants did not give this court a chance to consider that argument or evidence that might support it.

         The Seventh Circuit addressed a similar situation in United States v. Jones, where the defendant did not object at the time of the pretrial restraint but argued on appeal that the restraint violated his Sixth Amendment right to hire counsel of his choice and his Fifth Amendment right to due process of law. Jones, 844 F.3d 636, 640 (7th Cir. 2019). The Seventh Circuit began by explaining that where a defendant fails to object during the district court proceedings, the appellate court will review for plain error “assuming the defendant has not actually waived the point.” Id. The court stated that it “[could not] understand why [the defendant] failed to invoke his right to an immediate hearing under Moya-Gomez”-his right to an immediate hearing under Seventh Circuit case law. Id. at 641. It concluded that the defendant had “forfeited his challenge to the restraining order by failing to object in the district court, ” and reviewed the order only for plain error. Id. The court explained:

[B]ecause Jones never objected to the restraint on his life insurance policies, the district court had no reason to probe these matters in an evidentiary hearing. The district court committed no plain error by entering the pretrial restraining order, which invited Jones to challenge it promptly if he thought there were grounds to do so.

Id. at 642.

         The Seventh Circuit considered whether the Constitution mandates a post-restraint hearing in Moya-Gomez, when it addressed whether a pretrial restraint of the defendant's assets under 21 U.S.C. §853(e)(1)(A) violated the defendant's right to counsel of his choice and whether the pretrial restraint without an immediate post-restraint hearing violated the due process of the Fifth Amendment. Moya-Gomez, 860 F.2d at 716. The district court had entered an ex parte restraining order under 21 U.S.C. §853(e)(1)(A). Id. The Seventh Circuit rejected the defendant's argument that a pretrial restraining order freezing the assets of a defendant violates the defendant's absolute Sixth Amendment right to counsel. Id. at 725. “While a defendant whose entire assets are subject to a restraining order will not be able to retain counsel of choice, he has the right to have counsel appointed.” Id.

         At the same time, the Moya-Gomez court recognized a limited due process right to contest the government's forfeiture allegation if the pretrial seizure of his assets would prevent him from hiring the counsel of his choice. Id. The court began with a finding that the statute does not provide for a post-restraint hearing in contrast to the section governing preindictment freeze orders. Id.; Compare 21 U.S.C. §85(e)(1)(A), with 21 U.S.C. §853(e)(1)(B). The court found the statute constitutionally infirm in those cases where the defendant presents a bona fide need to utilize assets subject to the restraining order to conduct his defense. Id. The court's chosen language is worth noting: “If the district defendant presents a bona fide need to utilize assets subject to the restraining order to conduct his defense” and “the district court finds that the defendant does not have other assets from which such payments can be made, ” the court “then must require the government to demonstrate the basis for its assertion, contained in the indictment, that the assets are subject to forfeiture.” Id. (emphasis added). The Seventh Circuit concluded that there had been no due process violation in the case where counsel had objected to the order and the ...


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