United States v. Patrick Mire
838 F.3d 621
| 5th Cir. | 2016Background
- Patrick Mire pleaded guilty to mail fraud and money laundering and was ordered to pay $10 million in restitution; the government asserted a lien and obtained a writ of garnishment against Harbor America as garnishee.
- Harbor America acknowledged owing commission payments under two contracts with Mire’s entities: an Independent Representative Agreement (IRA) for ongoing commissions and an Asset Purchase Agreement (APA) providing ongoing percentage payments from acquired client contracts.
- Harbor America sued in Texas state court seeking a declaratory judgment that it could terminate both contracts based on Mire’s crimes; the state court granted summary judgment for Harbor America, but the government was denied intervention in that proceeding.
- The federal district court issued a disposition order requiring Harbor America to turn over funds and denied Harbor America’s motions to release registry funds and to terminate the garnishment; Harbor America appealed.
- The Fifth Circuit held the state-court declaratory judgment is not binding on the government because the government was denied intervention, and it reviewed whether Harbor America validly terminated each contract under Texas law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Effect of state-court declaratory judgment on federal restitution lien | Harbor America: state judgment conclusively terminated contracts, extinguishing Mire’s property interest | Government: judgment has no effect because U.S. was denied intervention and §7424 protection applies | Judgment not binding; government may litigate termination in collateral proceeding |
| Whether Harbor America could immediately terminate the IRA for Mire’s illegal conduct | Harbor America: IRA allows immediate termination for illegal business practices; it terminated on April 22, 2014 | Government: Garnishment was proper because money remained in Harbor’s possession; termination timing disputed | IRA was terminable; actual termination occurred Nov. 24, 2014 (termination letter); funds accrued before that date are garnishable |
| Whether Harbor America validly terminated the APA based on warranty breach | Harbor America: APA breach (unlawful conduct) justified termination and ends payment obligations | Government: APA lacks an immediate-termination clause; breach must be material and restitution issues arise | Unresolved: materiality of breach and restitution are fact questions; remanded for evidentiary findings |
| Remedy if APA terminated but Harbor America retained acquired clients | Harbor America: termination should allow retention of clients and end payments to Mire | Government/Mire: restitution principles require Harbor America to compensate Mire for benefit conferred (clients) | If termination is justified, Mire (now government) may be entitled to restitution; district court must calculate any restitution and pre-termination amounts |
Key Cases Cited
- United States v. Craft, 535 U.S. 274 (treats federal liens as attaching to state-law property interests)
- United States v. Nat’l Bank of Commerce, 472 U.S. 713 (government’s lienholder interest supports contesting disputes over property subject to lien)
- United States v. Elashi, 789 F.3d 547 (garnishment orders reviewed for abuse of discretion and state law defines property interests)
- United States v. Loftis, 607 F.3d 173 (restitution enforceable like a tax lien under §3613)
- Lennar Corp. v. Markel Am. Ins. Co., 413 S.W.3d 750 (Texas law: breach is excusing only if material; materiality is question of fact)