Civil Settlements and Criminal Restitution

Can a criminal sentence include restitution to a victim who has already released the defendant from all damages in a related civil suit?

Yes, according to State v. Williams.

Tamora Williams was the office manager for a construction company. She allegedly used company checks and a debit card to make over 350 unauthorized purchases valued at approximately $41,000. First she was fired, then she was charged with embezzlement.

While the embezzlement charge was pending, Ms. Williams sued her former employer, Mr. Fogleman, for slander and defamation. Mr. Fogleman countersued for the stolen company money. That civil litigation settled in 2017, with Williams paying Fogleman $13,500 and the parties signing an agreement that they “release and fully discharge each other of and from any and all claims, causes of actions, demands and damages, known and unknown, asserted and unasserted, from the beginning of time to the date hereof.” Slip op. at 3.

About a year later, the defendant entered a guilty plea to a single count of embezzlement. The plea agreement called for a probationary sentence, with an understanding that the court would determine the restitution amount—first by resolving the question of whether the restitution had already been paid in full through the civil settlement.

The court held a restitution hearing. The trial judge concluded that the civil settlement did not preclude the criminal court from ordering restitution, but that the defendant would be credited for the $13,500 paid through the settlement. The court therefore set the balance owed at $27,704.85.

Through a writ of certiorari, the defendant challenged the restitution order. She argued that the general release clause in the civil lawsuit barred the trial court from ordering further restitution through the criminal case.

The court of appeals disagreed, deciding as a matter of first impression in North Carolina that “civil settlement agreements and restitution awards are separate and distinct remedies,” and therefore the former does not bar the latter. The settlement is intended to compensate the victim for a civil wrong, while criminal restitution serves the additional “rehabilitative, deterrent, and retributive goals of the criminal justice system” by “forc[ing] the defendant to confront, in concrete terms, the harm his actions have caused.” Slip op. at 9 (quoting Kirby v. Florida, 863 So. 2d 238 (Fla. 2003)).

A key factor in the court’s analysis was that the State was not a party to the civil settlement. And because the State was not a party to the agreement, it was not impacted by it. Id. at 13 (“Private settlement or reimbursement agreements neither usurp the State’s ability to uphold criminal statutes nor impede on the State’s “distinct societal goals” of the criminal justice system.”). The court of appeals reviewed similar cases from other jurisdictions and found only one where the court had concluded that the state was precluded from seeking restitution when the parties had settled their claims civilly. See Minnesota v. Arends, 786 N.W.2d 885, 889 (Minn. Ct. App. 2010).

Before Williams, we knew by statute that prior receipt of a restitution award did not abridge the right of a victim to bring a civil action against the defendant for damages arising out of the defendant’s offense. G.S. 15A-1340.37(a). We didn’t know about the reverse situation. After Williams, that appears to be a two-way street, with neither option precluding the other.

I wonder, though, whether future release agreements might be crafted in a way that more clearly states that, in addition to whatever claims might be discharged as between the parties, the victim will not pursue restitution in any related criminal case—or that he or she expressly reserves the right to do so.  I also wonder what happens when this criminal restitution order gets docketed as a civil judgment.

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