Excessive Fines Cl;ause

Last week, the U.S. Supreme Court heard oral argument in the case of Timbs v. Indiana, which presents the issue of whether the prohibition on excessive fines in the Eighth Amendment of the U.S. Constitution is incorporated against the States under the Fourteenth Amendment.  Although it involves a civil asset forfeiture arising from the petitioner’s criminal conviction, the case could have significant implications for consumer financial services companies facing fines and penalties sought by State attorneys general and regulators.  More specifically, the case could provide a potent constitutional basis for challenging such fines and penalties.  The case’s potential significance is heightened as State AGs and regulators ramp up their supervisory and enforcement activity in order to fill the void created by a less aggressive CFPB.

The petitioner in the Supreme Court case, Timbs, had pled guilty to one count of dealing a controlled substance.  In addition to receiving a six year sentence, with the first year to be served in home detention and the remaining five years on probation, Timbs agreed to pay fines and court costs.  Indiana law allowed the court to impose a maximum fine of $10,000 for his crime.  Several months later, the State of Indiana filed a case seeking the forfeiture of the vehicle Timbs was driving at the time of his arrest: a Land Rover worth approximately $40,000.

Following an evidentiary hearing on the State’s forfeiture request, the Indiana trial court determined that forfeiture would be grossly disproportionate to the crime, and therefore unconstitutional under the Eighth Amendment’s Excessive Fines Clause.  The Eighth Amendment provides: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.”  The Indiana Court of Appeals affirmed but the Indiana Supreme Court unanimously reversed, declining to apply the Excessive Fines Clause because the U.S. Supreme Court has not yet held that the States are subject to the Excessive Fines Clause.

The questions and comments posed by the U.S. Supreme Court at the oral argument strongly suggested a general consensus among the justices that the Excessive Fines Clause is incorporated against the States under the Fourteenth Amendment, and therefore does apply to economic sanctions imposed by State and local governments.  The justices’ comments, however, suggested disagreement on the scope of the right guaranteed by the Excessive Fines Clause, especially in the context of civil asset forfeitures.  Because the Indiana Supreme Court did not reach the question of the forfeiture’s excessiveness due to the absence of definitive U.S. Supreme Court authority regarding the application of the Excessive Fines Clause to the States, the U.S. Supreme Court could hold that the Excessive Fines Clause does apply to the States, but not provide standards for determining whether a particular fine is unconstitutionally excessive.  A transcript of the oral argument is available here.