§905 Forfeitures, Jurisdictional Issues
Supreme Court holds that depositing res into U.S. treasury did not defeat appellate jurisdiction. (905) Rejecting the bank’s innocent owner defense, the district court ordered the proceeds from the sale of the residence to be forfeited to the United States. U.S. v. One Single Family Residence, 731 F.Supp. 1563 (S.D. Fla. 1990). The bank filed a timely notice of appeal, but did not deposit a supersedeas bond or seek to stay execution of the judgment, so the U.S. Marshal transferred the proceeds of the sale into the Asset Forfeiture Fund of the U.S. Treasury. The government then moved to dismiss the appeal for lack of jurisdiction over the res. The Supreme Court rejected the government’s argument, holding that the rule on which the government relied — that jurisdiction depends upon continued control of the res — “does not exist.” A majority of the Court also found it unnecessary to decide whether the “appropriations clause” made recovery of the res dependent on an act of Congress, ruling that 31 U.S.C. section 1304 and 28 U.S.C. section 2465 would authorize the return of funds in this case in any event. Republic National Bank of Miami v. U.S., 506 U.S. 80, 113 S.Ct. 554 (1992).
1st Circuit holds that because forfeiture notice was adequate, there was no waiver of sovereign immunity. (905) Currency seized from plaintiffs’ residence was administratively forfeited by the DEA. Plaintiffs’ filed a civil rights action against the DEA under 28 U.S.C. section 1331, alleging insufficient notice of the administrative proceeding, and that the currency was seized in violation of the 4th Amendment. The 1st Circuit held that because the notice was adequate, plaintiffs lost the waiver of sovereign immunity that had allowed the court to entertain the action, and thus the district court had no jurisdiction to consider plaintiff’s 4th Amendment claim. Sarit v. U.S. Drug Enforcement Administration, 987 F.2d 10 (1st Cir. 1993).
2nd Circuit says mere diminishment of business is insufficient to justify interlocutory appeal. (905) The 2nd Circuit held that it had no jurisdiction over an interlocutory order denying an application to vacate an in rem arrest warrant. Interlocutory orders are generally non-appealable unless they fulfill the requirements of 28 U.S.C. §1292. However, in U.S. v. Statewide Auto Parts, 971 F.2d 896 (2nd Cir. 1992), the court held that where a pre-trial seizure pursuant to an ex parte warrant effectively shuts down an ongoing business, an order denying vacatur of the seizure is appealable since it has all the earmarks of an injunction. Mere diminishment of business activity, as shown here, is insufficient to justify an exception to the rule. A writ of mandamus pursuant to 28 U.S.C. section 1651 was not justified since this was not an extraordinary case. U.S. v. Victoria-21, 3 F.3d 571 (2nd Cir. 1993).
2nd Circuit affirms criminal court’s jurisdiction over motion for return of forfeited property. (905) In 1988, defendant’s cash was forfeited after inadequate notice was given. In 1989, defendant was convicted and sentenced for a RICO violation. In 1992, defendant filed a rule 41(e) motion seeking return of the forfeited property. The government argued that only the court in the district in which the property was seized had jurisdiction over the motion. The 2nd Circuit disagreed, holding that the court that considered the criminal case had ancillary jurisdiction over the post-trial 41(e) motion. Because criminal proceedings were no longer pending against defendant, the motion was treated as a complaint for civil equitable relief. U.S. v. Giovanelli, 998 F.2d 116 (2nd Cir. 1993).
2nd Circuit says state ruling that U.S. had no jurisdiction did not bar new forfeiture action. (905) Local police initially impounded claimant’s Jeep after he was arrested on drug charges. Claimant filed a motion in state court under Vermont Rule 41(e) for return of the Jeep. Before the motion was decided, the federal government commenced an administrative forfeiture proceeding. The state court then granted claimant’s motion for the return of the Jeep, concluding that neither the state nor the federal government had an interest in the vehicle. Although the Jeep was returned to claimant, several days later DEA agents seized it again. The 2nd Circuit rejected claimant’s argument that the Vermont state court’s determination that the federal government had not established jurisdiction over the Jeep barred this second forfeiture action. The state court merely adjudicated claimant’s rights in the vehicle as they were implicated by the state criminal proceeding. The state court did not, and could not, adjudicate the federal government’s interest in the Jeep as that interest arose under the federal forfeiture statutes. U.S. v. One 1987 Jeep Wrangler Automobile, 972 F.2d 472 (2nd Cir. 1992).
2nd Circuit affirms its jurisdiction to review interlocutory seizure and closure of business. (905) In a civil forfeiture action brought under 18 U.S.C. section 981(a)(1)(A), the government seized claimant’s business and hung an “Out of Business” sign outside its building. The district court subsequently denied claimant’s motion to reopen the business. The 2nd Circuit upheld its jurisdiction to review the district court’s interlocutory order, which required the business to remain closed. The order had the effect of an injunction and thus was appealable under 28 U.S.C. section 1292(a)(1). The ex parte seizure warrant, combined with the district court’s subsequent refusal to vacate the seizure, had the same effect as if the district court had enjoined claimants from operating their businesses. The consequences of the order were even more dire than if the district court had appointed a receiver to run the business pending final disposition of the case. Since section 1292(a)(2) grants appellate courts jurisdiction over appeals from interlocutory orders appointing receivers, an order such as this one must also be appealable. Judge Van Graafeiland dissented. U.S. v. All Assets of Statewide Auto Parts, 971 F.2d 896 (2nd Cir. 1992).
2nd Circuit upholds its jurisdiction to review interlocutory order permitting government to sell claimants’ home. (905) In a civil forfeiture action against claimants’ home, the district court granted the government’s motion for an order permitting the interlocutory sale of the property, with the proceeds of the sale to be held in escrow pending resolution of the forfeiture issues. The 2nd Circuit affirmed its jurisdiction to review the order under the collateral order doctrine. This doctrine allows an appellate court to review immediately a district court order affecting rights that will be irretrievably lost in the absence of an immediate appeal. Given the unique nature of real property and the unique relationship between a person and his or her home, the order qualified as an appealable order: it conclusively determined an important issue, one that is separate from the merits of the action and one that would be effectively unreviewable on appeal from a final judgment. U.S. v. Esposito, 970 F.2d 1156 (2nd Cir. 1992).
3rd Circuit affirms that civil forfeiture may be brought in the district of the criminal prosecution. (905) Claimant was indicted as a co-defendant in a money laundering prosecution in the District of New Jersey. The government brought a civil forfeiture action in the same district against claimant’s accounts located in another district. Venue was authorized by 18 U.S.C. section 981(h), which permits a forfeiture proceeding against the property of a defendant to be brought in the district of the criminal prosecution. Relying upon cases which upheld a similar provision for drug cases in 21 U.S.C. section 881(j), the 3rd Circuit rejected a due process challenge to section 981(h). By limiting venue in civil forfeiture proceedings to those districts that have venue over a related criminal prosecution, section 981(h) prevents the government from seeking civil forfeiture in a court so inconvenient for the defendant that he is deprived of the fundamental fairness that is at the core of due process. U.S. v. Contents of Accounts Nos. 3034504504 and 144-07143 at Merrill, Lynch, Pierce, Fenner and Smith, Inc., 971 F.2d 974 (3rd Cir. 1992).
3rd Circuit holds that statute which gives venue outside district where res is located did not give court jurisdiction over the res. (905) In a civil forfeiture proceeding, 18 U.S.C. section 981(h) gives venue to a district court that does not have the res within its boundaries. The 3rd Circuit rejected the government’s claim that this provision authorizes extra-territorial jurisdiction as well as venue over a res outside a district’s boundaries. The court refused to imply a provision for nationwide service of process in section 981(h). Section 981(h)’s grant of venue still permits that court to adjudicate any rights criminal defendants may have in a res located elsewhere, without regard to service of process. Nonetheless, the government must still file a second civil forfeiture action in the district court where the res is found if it wishes to affect the rights of persons who are not subject to the territorial jurisdiction of the first district court. Thus, the default judgment in favor of the government on the forfeiture complaint was vacated. U.S. v. Contents of Accounts Nos. 3034504504 and 144-07143 at Merrill, Lynch, Pierce, Fenner and Smith, Inc., 971 F.2d 974 (3rd Cir. 1992).
5th Circuit permits pretrial restraint of assets to be appealed as injunction. (905) The district court partially granted the government’s pretrial motion for an order restraining certain substitute assets of defendant. Both the government and defendant appealed. The 5th Circuit ruled that it had jurisdiction under 28 U.S.C. § 1292(a)(1) to consider the appeals. Pretrial asset restraining orders are appealable as “injunctions.” The court rejected defendant’s claim that jurisdiction extended to his claim that count 10 of the indictment failed to state an offense. The sufficiency of the indictment could be examined adequately in any appeal from a final judgment. U.S. v. Floyd, 992 F.2d 498 (5th Cir. 1993).
6th Circuit upholds federal jurisdiction where state forfeiture proceedings were never instituted. (905) The 6th Circuit upheld the district court’s jurisdiction to consider a civil forfeiture action, rejecting claimant’s argument that state court had acquired exclusive jurisdiction over the defendant property. The State of Michigan never instituted a forfeiture action against the property. Although claimant received notice that his property had been seized by local police, this did not constitute the commencement of a state forfeiture action. No claim or cost bond was ever filed by claimant with the state and no petition for forfeiture was ever filed in state court. The defining act for exercise of state jurisdiction is the filing of a forfeiture complaint in state court. The fact that the res was seized by state authorities pursuant to a state search warrant did not give state courts exclusive jurisdiction. U.S. v. Certain Real Property 566 Hendrickson Boulevard, 986 F.2d 990 (6th Cir. 1993).
7th Circuit finds no jurisdiction over car where federal agents failed to obtain turnover order from the state. (905) The 7th Circuit held that under U.S. v. One 1979 Chevrolet C-20 Van, 924 F.2d 120 (7th Cir. 1991), the district court lacked in rem jurisdiction over a seized Mercedes because federal authorities failed to obtain a turnover order from the circuit court of the county in which the car was seized. The fact that state forfeiture proceedings were never instituted was not relevant; the holding of C-20 Van did not depend on the existence of the competing state forfeiture proceeding. An amendment to the Illinois forfeiture statute was not relevant since the amendments occurred after the unauthorized transfer of the car from local police to federal authorities. Finally, C-20 Van is not inconsistent with Supreme Court caselaw. None of the cases cited by the government involved a federal forfeiture action in competition with state court authority over the disposition of a res. U.S. v. One 1987 Mercedes Benz Roadster 560 SEC, 2 F.3d 241 (7th Cir. 1993).
7th Circuit says court lacked jurisdiction to consider forfeiture while administrative proceeding was pending. (905) After receiving notice of the administrative forfeiture proceedings, claimant did not follow the administrative procedures for challenging the seizure and forfeiture. Instead, he filed a complaint in the district court challenging the seizure and forfeiture on constitutional grounds. The 7th Circuit ruled that the district court lacked subject matter jurisdiction because it was divested of jurisdiction over the forfeiture of claimant’s currency when the DEA instituted administrative forfeiture proceedings. Additionally, there was no basis for equitable jurisdiction over claimant’s claim that the seizure of his currency violated the 4th Amendment, that the delay between the seizure and the forfeiture violated his 6th Amendment right to a speedy trial, or that the DEA’s notice of seizure was deficient, because he could have raised these claims in the administrative proceeding. Linarez v. U.S. Department of Justice, 2 F.3d 208 (7th Cir. 1993).
8th Circuit upholds its jurisdiction over cash transferred to Asset Forfeiture Fund and local police department. (905) Following the 1st, 2nd and 4th Circuits, the 8th Circuit upheld its appellate jurisdiction over cash transferred by the federal government to its Asset Forfeiture Fund and distributed to the local police department. By initiating the forfeiture action, the government subjected itself the court’s in personam jurisdiction. Thus, despite the government’s distribution of the res, the court retained jurisdiction over the parties throughout the case. Unlike admiralty cases, the property was in the possession of the government and was not in any danger of disappearing. Bank of New Orleans v. Marine Credit Corp., 583 F.2d 1063 (8th Cir. 1978) was inapplicable, since the money was easily accessible to the government. The local police department which received a portion of the funds was not an innocent purchaser, since it participated in the initial seizure of the money. Moreover, even under traditional in rem jurisdictional analysis the appellate court had jurisdiction, since the removal of the res from the jurisdiction of the court was improper. The government transferred the money one day after entry of judgment, in violation of the 10-day automatic stay under Fed. F. Civ. P. 62(a). U.S. v. Twelve Thousand, Three Hundred Ninety Dollars ($12,390.00), 956 F.2d 801 (8th Cir. 1992).
8th Circuit rejects claim that state court acquired jurisdiction over seized cash. (905) Local police seized cash from claimants’ residence. Five days after the seizure, the money was turned over to the DEA and federal forfeiture proceedings were begun. The 8th Circuit rejected claimants’ argument that the district court should have dismissed the action because the state court had already acquired jurisdiction over the money. Local authorities voluntarily transferred the money to the DEA, and no state forfeiture proceeding was ever commenced. The federal government took possession of the money and initiated the requisite paperwork for an administrative forfeiture. It was true that after the money had been delivered to the DEA the state court directed the local police to return the money to claimants. However, the money was no longer in state custody. The court could have ordered the police to pay to claimants an equivalent sum of money, but never took such action. The state court denied claimants’ request to hold the DEA agent who took the money in contempt. Thus, the state court itself did not consider that any affront had occurred. U.S. v. Twelve Thousand, Three Hundred Ninety Dollars ($12,390.00), 956 F.2d 801 (8th Cir. 1992).
9th Circuit says claimant was entitled to hearing on claim of inadequate notice of forfeiture. (905) Claimant and three others were in a residence from which the government seized $14,700. The government believed the money belonged to Steven Udell, so when it forfeited the money, it sent notice to Udell at the residence, as well as publishing a notice in a legal newspaper. In the meantime, the claimant pled guilty to conspiracy to manufacturing methamphetamine. Three months after the money was forfeited, the claimant filed a motion for return of the money. The district court denied the motion as an improper collateral attack on the forfeiture proceedings. On appeal, the 9th Circuit reversed, holding that the claimant was entitled to a hearing on his due process claim of inadequate notice. The panel rejected dicta in U.S. v. Elias,, 921 F.2d 870 (9th Cir. 1990) which directed due process forfeiture challenges to the Court of Federal Claims. The question of the claimant’s standing was left open on remand. U.S. v. Clagett, 3 F.3d 1355 (9th Cir. 1993).
9th Circuit finds failure to specify order appealed from did not preclude review on appeal. (905) The government argued the court of appeals lacked jurisdiction over this forfeiture appeal because appellant failed to comply with Fed. R. App. P. 3(c) by not specifying in her notice of appeal the specific issue being appealed (an abatement issue). The court disagreed finding the government had notice of appellant’s intent to argue the abatement issue on appeal and the government was not prejudiced. Appellant’s entire brief addressed the abatement issue and the issue was specifically preserved in the stipulated judgment. U.S. v. $84,740 Currency, 981 F.2d 1110 (9th Cir. 1992).
10th Circuit holds that § 981(h) does not authorize nationwide service of process. (905) In Colorado, the government brought a forfeiture action against real property in New Mexico under 18 U.S.C. § 981, 1341, 1343, and 1956, alleging the property was purchased in furtherance of a money laundering scheme by Austin, who was indicted in Colorado. Legal title to the property was held by a business trust, and Austin was allegedly the trust’s alter ego. The 10th Circuit held that the Colorado federal court lacked in rem jurisdiction over the New Mexico property. Section 981(h), which gives venue in the district where the defendant owning such property is found, did not give the Colorado court jurisdiction. To exercise jurisdiction over the property, the court must be able to execute service of process on it. The district court could not execute service of process outside Colorado unless some federal statute authorized the court to do so. Section 981(h) does not provide for nationwide service of process. The amendment of 28 U.S.C. § 1355 in 1992 did not retroactively give the district court jurisdiction. Because the court lacked jurisdiction over the property, the court erred in entering a forfeiture judgment. U.S. v. 51 Pieces of Real Property, 17 F.3d 1306 (10th Cir. 1994).
10th Circuit holds court obtained in personam jurisdiction over trust when it responded to government’s default motion. (905) The government brought a forfeiture action in Colorado against real property in New Mexico. It alleged the property was purchased in furtherance of a money laundering scheme by Austin, who was indicted in Colorado. Legal title was held by a business trust, and Austin was allegedly the trust’s alter ego. After finding no in rem jurisdiction over the property, the 10th Circuit considered whether the court had personal jurisdiction over the trust, so it could adjudicate the rights of the government in the property as against the trust. The appellate court found that the court’s exercise of jurisdiction over Austin in the criminal proceeding did not automatically confer personal jurisdiction in the related civil proceeding. However, the trust submitted itself to the jurisdiction of the court when it responded to the government’s amended motion for default. This was a defensive move that triggered the provisions of Rule 12(h), since the trust failed to object to the court’s jurisdiction in its response to the motion. U.S. v. 51 Pieces of Real Property, 17 F.3d 1306 (10th Cir. 1994).
11th Circuit holds federal court prematurely exercised jurisdiction before state court disposed of res. (905) On July 14, a state court entered a partial final order that dismissed a state forfeiture action against certain property. An appeal was taken, but on August 29, a notice of voluntary dismissal was filed. On September 1, claimant filed a motion for return of the res, and this motion was granted on September 19. However, on August 29, state and federal law enforcement personnel had informally transferred the res from state to federal hands, and the federal government had filed a forfeiture action in federal court. U.S. Marshals refused to comply with a state order to return the res to claimant. On appeal from the federal forfeiture of the property, the 11th Circuit reversed, directing the federal court to return the res to the state court’s jurisdiction. In rem jurisdiction must encompass the right of the court asserting jurisdiction to control and dispose of the property. Here, the federal court had prematurely exercised jurisdiction before the state court ordered final disposition of the res. U.S. v. $270,000 in United States Currency, Plus Interest, 1 F.3d 1146 (11th Cir. 1993).
11th Circuit holds failure to request stay or post bond, combined with sale of forfeited property, deprived it of jurisdiction. (905) In a civil forfeiture action against property jointly owned by claimant and her husband, the district court entered a forfeiture order in favor of the government. Claimant filed a timely notice of appeal, but failed to seek a stay of the district court’s order. Claimant did file a lis pendens against the property. Shortly after the 10-day automatic stay expired, the property was sold by the U.S. Marshal. The 11th Circuit held that the failure to request a stay or post a supersedeas bond, combined with the subsequent sale of the property under court order to a third party, deprived the appellate court of in rem jurisdiction. The filing of a notice of lis pendens did nothing to alter this outcome. Lis pendens is merely a notice of pending litigation. It informed prospective purchasers that they should look to the litigation to determine when and if it was safe to purchase the property. Here, the district court’s order specifically gave the government the right to dispose of the property after the expiration of the automatic stay. U.S. v. Certain Real and Personal Property Belonging to Ronald Jerome Hayes, 943 F.2d 1292 (11th Cir. 1991).