§920 Forfeitures, Procedural Issues, Generally
1st Circuit holds that process is executed after notice to owner of res and service of arrest warrant. (920) Supplemental Rule C(6) requires a claimant of property subject to a civil forfeiture action to file a claim within 10 days after process has been executed. The 1st Circuit held that “process has been executed” only when (a) a properly issued warrant for arrest in rem has been properly served upon the res, and (b) the requisite notice has been given to potential claimants. For an owner who has been personally served with notice of the forfeiture, part (b) is satisfied upon service of the notice, not upon a later publication date. For any owner not personally served with notice, part (b) is satisfied upon publication of notice. Thus, since claimant was personally served with notice of the forfeiture of his stock on January 3, his claim filed January 31 was untimely, assuming the arrest warrant was also served January 3. However, since the record did not reveal when the arrest warrant was served, the case was remanded. U.S. v. Approximately Two Thousand, Five Hundred Thirty-Eight Point Eighty-Five Shares (2,538.85) of Stock Certificates of the Ponces Leones Baseball Club, Inc., 988 F.2d 1281 (1st Cir. 1993).
1st Circuit holds that Fed. R. Civ. P. 37 prohibits dismissal of forfeiture claim as initial discovery sanction. (920) Claimant promptly filed a claim and answer to the government’s forfeiture complaint but did not answer the interrogatories. The district court granted the government’s motion to strike the claim because the interrogatories remained unanswered. The 1st Circuit held that Fed. R. Civ. P. 37 prohibited the district court from dismissing the forfeiture claim as an initial sanction for failing to answer the interrogatories. Although the Admiralty Rules provide for discovery through interrogatories, they do not provide a mechanism for handling a party’s failure to answer the interrogatories. Thus, the use of discovery sanctions in forfeiture actions is properly governed by the pertinent provisions of the Federal Rules of Civil Procedure. Rule 37 erects a two-tiered framework for addressing a litigant’s failure to cooperate in discovery. First, the party propounding interrogatories must seek a court order compelling discovery. Only after the offending party refuses to comply with such a court order may the court impose a sanction as harsh as dismissing the action or striking the offender’s pleading. Here, neither condition was met. U.S. v. One 1987 BMW 325, 985 F.2d 655 (1st Cir. 1993).
1st Circuit affirms that forfeiture complaint contained sufficient particularity. (920) The 1st Circuit affirmed that the government’s forfeiture complaint contained sufficient particularity to satisfy Rule E(2)(a) of the Supplemental Rules for Certain Admiralty and Maritime Claims. The complaint was more than sufficient to support a reasonable belief that the government, at trial, could make a probable cause showing that most, if not all, of the defendant property was connected to illegal drug proceeds. The facts alleged in the complaint were sufficient to put claimant on notice, and provide him enough information to allow him to investigate and respond to the complaint. The complaint alleged that a fugitive from justice, acting under an alias, purchased the defendant properties with money he derived from trafficking of large amounts of controlled substances, as he was not in any other way employed during the time of the purchases. The complaint also alleged that these purchases took place between the years 1985 and 1988. U.S. v. Twp 17 R 4, Certain Real Property in Maine, 970 F.2d 984 (1st Cir. 1992).
1st Circuit rules that claimant’s failure to furnish cross-statement of facts constituted admission of government’s assertions. (920) The 1st Circuit rejected claimant’s contention that he was an innocent owner. The burden of proving the defense of innocent ownership rests with the claimant. Claimant’s initial opposition to the government’s motion for summary judgment included no affidavits, only a general denial of some allegations in the forfeiture complaint and a “weasel-worded challenge” to the thrust of the detailed affidavits supporting the forfeiture complaint. Moreover, claimant failed to furnish the required cross-statement of facts. Thus, his unexcused omissions had the legal effect of admitting the government’s factual assertions. U.S. v. Parcel of Land and Residence at 18 Oakwood Street, 958 F.2d 1 (1st Cir. 1992).
2nd Circuit holds it was error to permit government to amend its forfeiture complaint to conform to proof at trial. (920) In February, the government filed an action against property partially owned by claimant, seeking forfeiture based upon drug activity at the property, which was uncovered by a police raid the previous July. Claimant asserted an innocent owner defense, alleging that she was unaware of the drug activities. The tape recording of an incriminating conversation which took place that February between claimant and a tenant of the property was introduced at trial. Over defendant’s objections, the jury was then instructed that it could consider defendant’s knowledge of illegal activities as of the date of the February seizure, rather than as of the July raid. The district court granted the government’s informal motion to amend its complaint to conform to the evidence pursuant to Fed. R. Civ. P. 15(b). The 2nd Circuit reversed. The original complaint and answer, and the government’s opening statement focused entirely on activity prior to the July raid. Only in the government’s summation did a theory of forfeiture based upon drug activity after July arise. Defendant was prejudiced by the amendment, since it was not until after the conclusion of the trial that the district court recognized the issue. U.S. v. Certain Real Property and Premises, Known as 8890 Noyac Road, 945 F.2d 1252 (2nd Cir. 1991).
2nd Circuit holds that government waived right to assert a “traceable proceeds” theory as to entire bank account. (920) The government seized a bank’s interbank account. In a civil forfeiture motion under 18 U.S.C. § 981, the government alleged that Colombian drug cartels used money orders to launder money through the interbank account. Although only about $1.7 million of the funds came from money orders, the government sought forfeiture of the entire $7 million in the account on the grounds that the non-laundered funds became “involved” in money laundering by providing cover for the deposits attributed to money orders. When the district court rejected this claim, the government moved for reconsideration, claiming that it had established probable cause to seize the entire account on a “traceable proceeds” theory. The district court held that the government had waived its right to assert a “traceable proceeds” theory, and the 2nd Circuit agreed. It was not until several weeks after the hearing on the bank’s motion that the government asserted it was proceeding on a traceable proceeds theory. The government raised this theory too late to be considered by the court. Marine Midland Bank v. U.S., 11 F.3d 1119 (2nd Cir. 1993).
2nd Circuit upholds warrantless seizure of electronic transfer funds. (920) The 2nd Circuit upheld the warrantless seizure of funds being electronically transferred. Under 21 U.S.C. section 881(b)(4), when the Attorney General has probable cause to believe that property is subject to forfeiture under section 881, the government is authorized to seize the property without judicial process. Here, the Assistant U.S. Attorneys, as representatives of the Attorney General, clearly had such probable cause. This was not a case in which the government stumbled into a seizure without any prior information about the subject property. The government knew that the head of a Colombian drug cartel, who had already been indicted for various drug and money laundering violations, would probably be directing the transfer of illicit income through particular New York banks to the accounts of several of his businesses in Colombia. In addition, as required by statute, the government initiated forfeiture proceedings promptly and in accordance with applicable customs laws. U.S. v. Daccarett, 6 F.3d 37 (2nd Cir. 1993).
2nd Circuit holds that complaints for seizure of electronic transfer funds were stated with sufficient particularity. (920) The 2nd Circuit held that the in rem complaints and their accompanying warrants for the seizure of funds being transferred electronically complied with the particularity requirements in the Supplemental Rules. By naming both the intermediary banks through which the funds were to be transferred and the intended beneficiaries of the funds, the complaint described the subject property with “reasonable particularity” as required by Supp. Rule C(2). By recounting the methods that the head of a Colombian drug cartel used to funnel his narcotics proceeds through various New York banks for ultimate deposit in Colombian bank accounts, the complaint stated “the circumstances from which the claim [arose]” with sufficient particularity for the claimants to “commence an investigation of the facts and frame a responsive pleading,” as required by Supp. Rule E(2). U.S. v. Daccarett, 6 F.3d 37 (2nd Cir. 1993).
2nd Circuit reverses order permitting government to conduct an interlocutory sale of claimants’ house. (920) In a civil forfeiture action against claimants’ home, the district court permitted an 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 reversed, since the district court did not make any findings of fact or mention any of the factors listed in Supplemental Rule E(9)(b) for the interlocutory sale of seized property. Rule E(9)(b) allows a court to order an interlocutory sale of seized property if the property is perishable or liable to deterioration, if the expense of keeping the property is excessive, or if there is unreasonable delay in securing the release of the property. Although a building is subject to depreciation, real property is not, and there was no finding that the home was deteriorating while in custody. Moreover, the $675,000 sale price was too low given a four-month old appraisal valuing the property at $910,000. The government’s expense of $22,000 for maintenance and repair during a four year period was not excessive. Any delay was principally the fault of the government. U.S. v. Esposito, 970 F.2d 1156 (2nd Cir. 1992).
3rd Circuit applies reasonable doubt standard to RICO criminal forfeiture. (920) The jury’s criminal RICO verdict found cash and real property were subject to forfeiture under 18 U.S.C. § 1963(a). Defendant argued that it was error to instruct the jury that the burden of proof was a preponderance of the evidence. The 3rd Circuit agreed. When the criminal forfeiture provisions were enacted in 1970, it was generally understood that a criminal forfeiture claim was similar to a substantive criminal charge and therefore had to be proved like a criminal charge. Congress later amended both RICO and CCE by specifically providing a preponderance of the evidence burden of proof with respect to CCE criminal forfeiture proceedings and certain aspects of RICO, but left section 1963(a) undisturbed. This showed that Congress intended the higher beyond a reasonable doubt standard to control in a section 1963(a) proceeding. U.S. v. Pelullo, 14 F.3d 881 (3rd Cir. 1994).
3rd Circuit rules indictment did not violate minimal notice standard of Rule 7(c)(2). (920) The 3rd Circuit rejected defendants’ claim that the criminal forfeiture indictments with regard to their interests in a corporation violated the minimal notice standards of Fed. R. Crim. P. 7(c)(2) so as to render the forfeiture order ineffective as to that corporation. Although Rule 7(c)(2) does not require an exact or detailed tracking of section 1963 in the indictment, the court was concerned with a slackening of this standard. Nevertheless, absent prejudice to the defendants in light of uncontested de facto notice, and in light of the indictment’s clear reference to the theory of forfeiture alleged, the indictment adequately notified the defendants that the government’s forfeiture allegation extended to their interest in the corporation. U.S. v. Sarbello, 985 F.2d 716 (3rd Cir. 1993).
4th Circuit holds claimant established “excusable neglect” for failing to file her claim sooner. (920) A forfeiture action against claimant’s husband’s property was filed in federal court in West Virginia in November 1989. Claimant, who lived in Seattle, was not served, because the government erroneously believed that she was divorced. By January, 1990, the government was aware that the marriage was in effect but still did not serve her. A divorce decree was entered May, 1990, entitling claimant to the funds. On June 21, 1990, claimant’s divorce counsel was informed that the government had frozen the assets, but that an Assistant U.S. Attorney would release the money to claimant. The Assistant U.S. Attorney failed to return several telephone calls. Claimant then hired a local attorney, and on September 4, 1990, filed a motion for enlargement of time to file a claim. The 4th Circuit reversed the district court’s denial of this motion, holding that defendant’s failure to act could be deemed “excusable neglect.” The most important factor to consider was the degree of prejudice to the government, and the government never offered “even a hint of insinuation” that it would be unfairly prejudiced by the claim. Judge Wilkinson concurred in the result but disagreed that prejudice to the government was the most important factor to consider. U.S. v. Borromeo, 945 F.2d 750 (4th Cir. 1991).
5th Circuit holds that forfeiture order is an appealable “sentence” under § 3742(b). (920) Defendant argued that the government was not authorized to appeal the district court’s denial of its motion for forfeiture under 18 U.S.C. § 1467. The 5th Circuit held that a forfeiture order is a “sentence” under 18 U.S.C. § 3742(b) and thus is appealable. The sentencing guidelines treat forfeiture as part of the sentence to be imposed upon a defendant. U.S. v. Investment Enterprises, 10 F.3d 263 (5th Cir. 1993).
5th Circuit remands because it was unclear whether district court applied correct burden of proof. (920) The district court dismissed the government’s civil forfeiture action under 21 U.S.C. section 881(a)(7) against a house owned by claimant. The 5th Circuit remanded because it was unclear whether the district court applied the correct burden of proof. Once the government establishes probable cause to believe that the defendant real property violated section 881(a)(7), the burden shifts to the claimant to establish by a preponderance of the evidence that the property was not used for illegal activity. The government’s burden of proof is the same for all forfeiture actions under section 881. The government bears the initial burden of demonstrating probable cause to believe that the property was used to distribute or store illegal drugs. If unrebutted, a showing of probable cause alone will support a forfeiture. U.S. v. Land, Property Currently Recorded in the Name of Gerald Franklin Neff, 960 F.2d 561 (5th Cir. 1992).
5th Circuit rules that notice of appeal was not nullified by motion for rehearing. (920) On April 22, claimant filed a motion to set aside an April 15 default judgment in a forfeiture action. On May 15 the motion was denied. Defendant then filed a motion for rehearing on May 22 and a notice of appeal on May 28. The motion for rehearing was denied by the district court on May 29 and no subsequent notice of appeal was filed. The 5th Circuit held that the May 28 notice of appeal was not nullified under Fed. R. Civ. P. 4(a)(4) by the May 22 motion for rehearing that was not disposed of until May 29. The April 22 motion to set aside the default judgment should be treated, for purposes of Rule 4(a)(4), as a motion under Fed. R. Civ. P. 59. As such the May 22 motion for rehearing would, under Harcon Barge Co. v. D & G Boat Rentals, 784 F.2d 665 (5th Cir. 1986), be regarded as a Rule 59 motion directed to the overruling of a prior Rule 59 motion. Any motion to amend a judgment served within 10 days after entry of judgment, except for a proper Rule 60(a) motion to correct purely clerical errors, is to be considered a Rule 59(e) motion. U.S. v. One 1988 Dodge Pickup, 959 F.2d 37 (5th Cir. 1992).
5th Circuit holds claim of ownership and government’s allegations of claimant’s involvement with seized cash established standing. (920) The 5th Circuit reversed the district court’s determination that claimant failed to establish standing to challenge the forfeiture of $38,570 seized from his companion. A bare assertion of ownership of the res, without more, is insufficient to prove an ownership interest and establish standing. Thus, claimant’s assertion that “I own the money,” without more, did not establish his standing to challenge the forfeiture. However, standing was established because the government admitted claimant’s relationship with the cash, and the complaint clearly specified that claimant exercised some form of dominion over the currency. U.S. v. $38,570 U.S. Currency, 950 F.2d 1108 (5th Cir. 1992).
5th Circuit holds that Rule 11 requirement of factual basis for plea does not apply to forfeitures. (920) Defendant’s plea agreement provided for the forfeiture of certain property. He contended that Rule 11(f)’s requirement of an adequate factual basis for a guilty plea applies equally to forfeiture orders, and that the government failed to establish an adequate factual basis for the forfeiture. The 5th Circuit held that Rule 11’s requirement does not apply to an order of forfeiture. Instead, it would uphold a forfeiture order, “if the entire record which was before the court provided a factual basis for the forfeiture.” There was such a factual basis here. The indictment alleged that all of the properties listed were acquired or maintained through defendant’s racketeering activities, and listed how the properties were derived from the proceeds of those activities. The plea agreement listed all of the properties that defendant agreed to forfeit. At the plea hearing, defendant acknowledged that he understood that all of the property listed in the plea agreement was subject to forfeiture. U.S. v. Bachynsky, 949 F.2d 722 (5th Cir. 1991).
5th Circuit upholds forfeiture because claimant did not perfect ownership interest in automobile under state law. (920) Claimant, an attorney, made an oral agreement with his client to represent the client for $50,000. The client offered $6,500 in cash and his 1977 Porsche Carrera 911. Claimant then entered into a written form contract in which the client agreed to pay a retainer in the amount of $50,000. The contract did not mention the car. Nonetheless, that day, claimant took physical possession of the car. Although the client had obtained the car several months before, he did not register his title to it until after claimant obtained possession of the car. The certificate assigning title to claimant remained unrecorded during a subsequent forfeiture action against the car based on the client’s drug activities. The 5th Circuit held claimant’s possessory interest gave him standing to challenge the forfeiture, but rejected his innocent owner defense because his interest in the vehicle was not valid against third parties under Texas law. Since neither claimant or his client had a perfected title in the car when it was seized, claimant acquired the car subject to the forfeiture interest of the government. U.S. v. 1977 Porsche Carrera, 946 F.2d 30 (5th Cir. 1991).
5th Circuit upholds seizure of property alleged to be in violation of food and drug laws. (920) The government applied to the district court for a warrant to seize property alleged to be in violation of the Federal Food, Drug, and Cosmetic Act. After the warrant was issued, another judge in the same district court rescinded the seizure and ordered the return of the property. Despite claimant’s contention that the seizure was based upon inaccurate factual information, the 5th Circuit upheld the seizure, ruling that when a complaint which complies with the provisions of the admiralty rules seeks forfeiture of articles of property alleged to be in violation of the federal food and drug laws, the government is entitled to secure a warrant and maintain its seizure on the property until a court hears the merits of the conflicting claim. To balance a claimant’s due process rights with the interests of public health, a hearing on the merits should be scheduled at the promptest date possible considering the court’s emergency calendar and the ability of the parties to prepare and present the controversy to the court. U.S. v. Proplast II, 946 F.2d 422 (5th Cir. 1991).
6th Circuit precludes appeal of summary judgment by claimant who had not denied knowledge under oath. (920) Claimant appealed the district court’s summary judgment of forfeitability, arguing that the court improperly held that he was collaterally estopped from denying forfeitability because of his criminal conviction. The 6th Circuit affirmed, holding that claimant’s failure to testify at his criminal trial or otherwise to deny under oath that he knew of the drug activity on his property precluded his appeal. U.S. v. Three Tracts of Property Located on Beaver Creek, 994 F.2d 287 (6th Cir. 1993).
6th Circuit holds that government was not estopped by claimants’ belief that appeal of conviction stayed the forfeiture. (920) Claimants originally filed petitions challenging the forfeiture of property under 21 U.S.C. section 853 based upon their co-conspirator’s conviction of CCE charges. They then withdrew the petitions in the erroneous belief that the appeal of the criminal conviction stayed the forfeiture. The 6th Circuit rejected claimants’ argument that the government was estopped from proceeding with the forfeiture. Several months before the forfeiture order was made, claimants’ counsel stated in court his belief that an appeal would suspend any seizures until completion of the appeal. Neither the district court nor the assistant U.S. Attorney corrected this statement. However, the district court found that petitioners knew to file their petition within 30 days, they were aware that the petition was required to allow them to intervene in the action. Moreover, parties who assert estoppel must prove their reliance was induced, and there was no evidence of inducement. Finally, the district court conducted a review and concluded that petitioners had no interest in the properties. U.S. v. Patrick, 988 F.2d 641 (6th Cir. 1993).
6th Circuit applies preponderance standard to criminal forfeiture. (920) Following defendant’s criminal conviction, the government sought criminal forfeiture of some of defendant’s property under 21 U.S.C. section 853(a). Following precedent in other circuits, the 6th Circuit held that the forfeitability of defendant’s property need be shown only by a preponderance of the evidence, not by proof beyond a reasonable doubt. The court noted but rejected the argument that the preponderance standard should apply only to “proceeds” forfeitures. U.S. v. Smith, 966 F.2d 1045 (6th Cir. 1992).
7th Circuit refuses to consider challenge to transfer of funds because not raised below. (920) Defendant claimed for the first time on appeal that the transfer of his seized currency from the local police to the DEA was improper because local police failed to secure an order from a state court authorizing the transfer. The 7th Circuit refused to review the issue, since defendant had not raised it below. Linarez v. U.S. Department of Justice, 2 F.3d 208 (7th Cir. 1993).
8th Circuit holds defendants waived objection to all-or-nothing forfeiture by failing to object to jury instructions. (920) Defendants were convicted of bank fraud and RICO charges stemming from the collapse of the saving and loan association of which they were officers. Defendants argued that the district court should not have forfeited 100 percent of the salaries and bonuses that the jury found were proceeds of RICO activity. They contended on appeal that portions of the salaries and bonuses were earned through legal activity. The 8th Circuit found that defendants had waived this complaint by failing to object below to the jury instruction and verdict form. Moreover, the evidence supported complete forfeiture of the salaries and bonuses. U.S. v. Olson, 22 F.3d 783 (8th Cir. 1994).
8th Circuit says preponderance standard applies to criminal forfeitures under 21 U.S.C. § 853(a). (920) Defendants argued that the district court erred in applying a preponderance of the evidence standard to determine that they used their property for drug trafficking. The 8th Circuit affirmed, holding that the preponderance standard applies to criminal forfeitures under 21 U.S.C. § 853(a). Congress designated criminal forfeiture as part of the sentencing or punishment phase of a criminal proceeding and gave no indication that a higher standard applies than normally applies at sentencing. Although language in a previous 8th Circuit case suggested a beyond a reasonable doubt standard, this language has been undercut by two Supreme Court cases which indicate that forfeiture, whether criminal or civil, is intended to be a form of punishment akin to a sentencing enhancement, and not a separate offense. U.S. v. Bieri, 21 F.3d 811 (8th Cir. 1994).
8th Circuit holds criminal forfeiture for money laundering is by a preponderance. (920) Defendant’s farm was found forfeitable under 21 U.S.C. § 853(a)(2) because it had been used to facilitate drug offenses, and under 18 U.S.C. § 982(a)(1) because it had been involved in a money laundering scheme. In U.S. v. Bieri, 21 F.3d 811 (8th Cir. 1994), decided the same day, the 8th Circuit held that the preponderance of the evidence standard of proof applies to forfeitures under § 853(a)(2). Here, the 8th Circuit, relying on Bieri, held that the preponderance standard of proof applies to forfeiture under 18 U.S.C. § 982(a)(1) as well as under 21 U.S.C. § 853(a)(2). U.S. v. Myers, 21 F.3d 826 (8th Cir. 1994).
8th Circuit refuses to open default forfeiture judgment where claimant failed to show meritorious defense. (920) Defendant challenged a default forfeiture judgment against his property, claiming his counsel had collaborated with the government by allowing the property to be forfeited. The 8th Circuit upheld the district court’s refusal to set aside the default, agreeing that even if claimant’s allegations were true, he had failed to show any basis upon which he could succeed if the default judgment was vacated. The government alleged that claimant purchased the property with a down payment of $18,000, using four cashier’s checks and four money orders from five different banks. Claimant extensively remodeled the property. Claimant’s business was merely a front, and his tax returns showed income woefully inadequate to support the remodeling. Claimant did not deny these allegations and failed to produce any evidence that the money to purchase and improve the property came from legal sources. U.S. v. Premises Known as 15145 50th Street South, 5 F.3d 1137 (8th Cir. 1993).
8th Circuit holds that separate notice of appeal is required for post-trial forfeiture proceedings. (920) On June 24, defendants were sentenced and judgments of conviction were filed. The court did not rule on the forfeiture issues at that time, but directed the parties to submit briefs discussing which standard of proof was applicable to the forfeiture proceeding. On June 30, defendants filed a notice of appeal. On August 31, the district court ruled that the preponderance of the evidence standard applied, and on September 24, issued two forfeiture orders. Defendants never filed a notice of appeal from those orders. The 8th Circuit held that it was without jurisdiction to hear the forfeiture appeal since defendants failed to file a notice of appeal from the forfeiture orders. The failure to file a notice of appeal from a post-conviction forfeiture proceeding does not preserve the issue for appeal. U.S. v. Casas, 999 F.2d 1225 (8th Cir. 1993).
8th Circuit upholds default judgment where claimant failed to satisfy Supplemental Rule C(6). (920) Claimant filed a timely claim but did not file an answer until well after the deadline established in Rule C(6) of the Supplemental Rules for Certain Admiralty and Maritime Claims. The 8th Circuit affirmed the district court’s refusal to consider the claim as sufficient, by itself, to satisfy Rule C(6). Strict compliance with the Rule requires both a claim and an answer. There was no error in denying leave to file a late answer, since claimant did not show excusable neglect. Claimant was a licensed attorney and was not ignorant of the procedural requirements. Moreover, at least three documents outlined the requirements of Rule C(6). Claimant also offered no good reason why the district court should have granted him additional time to respond to the government’s motion to strike the claim. The fact that the motion was inadvertently filed directly with the judge rather than through the clerk’s office made no practical difference to claimant. U.S. v. Ford 250 Pickup 1990, 980 F.2d 1242 (8th Cir. 1992).
8th Circuit says forfeiture complaint met particularity requirements of Supplemental Rule E(2)(a). (920) The 8th Circuit reversed the district court’s ruling that the government’s forfeiture complaint under 21 U.S.C. section 881(a)(6) did not meet the particularity requirements of Rule E(2)(a) of the Supplemental Rules for Certain Admiralty and Maritime Claims. The government sought to forfeit $150,660 seized from claimant at an Amtrak station. The circumstantial evidence indicated the money was drug-related: claimant purchased a one-way ticket with cash; he was carrying a large sum of cash; the bills were old looking and were not bound by bank money wrappers, despite claimant’s contention that he had withdrawn the money from a bank; the currency smelled like dry marijuana; and the bank account from which claimant said he withdrew the funds had been closed for over a year and never had a balance greater than $5680. These facts, strongly suggested that the currency was connected with drug activity. Senior Judge Bright dissented. U.S. v. U.S. Currency, In the Amount of $150,660.00, 980 F.2d 1200 (8th Cir. 1992).
8th Circuit affirms striking unverified pleadings. (920) The 8th Circuit upheld the district court’s decision to grant the government’s motion to strike claimant’s pleadings and enter a default judgment and a final order of forfeiture. The district court struck the pleadings for two reasons. First, the claims did not comply with Supplemental Rule C(6) because they were not verified. It is not an abuse of discretion for the district court to require strict compliance with Supplemental Rule C(6). Second, the government’s motions to strike claimants’ claims and answers were unresisted. An unresisted motion may be granted. The appellate court also granted the government’s motion to strike claimants’ Addendum to their Reply Brief. The addendum consisted of 43 pages of newspaper articles that were reprinted from the Pittsburgh Press. This did not comply with 8th Circuit Rule 30A(d)(1). U.S. v. One Parcel of Property Located at RR 2, Independence, Buchanan County, Iowa, 959 F.2d 101 (8th Cir. 1992).
8th Circuit holds that child had no standing to contest forfeiture of parent’s property. (920) The 8th Circuit ruled that a child had no standing to contest to forfeiture of property owned by his mother. There was no showing that the child had any present ownership interest in the property. The future expectation of ownership by a child is insufficient to give a claimant standing. U.S. v. One Parcel of Property Located at RR 2, Independence, Buchanan County, Iowa, 959 F.2d 101 (8th Cir. 1992).
9th Circuit says unsecured creditor has no standing to contest forfeiture. (920) In this civil forfeiture action under 18 U.S.C. § 981(a), the district court ruled that the claimant had no standing to challenge the forfeiture of the cash and jewelry because he was simply an unsecured creditor. On appeal, the 9th Circuit agreed. “The plain language of § 981(a)(2) requires that the claimant be an owner or a lienholder of an interest in the forfeitable property.” Since he was merely an unsecured creditor, the district court properly granted summary judgment in favor of the government and ordered his claim stricken. U.S. v. $20,193.39 U.S. Currency, 16 F.3d 344 (9th Cir. 1994).
9th Circuit reverses summary judgment where affidavits raised factual question. (920) The United States moved to forfeit two tracts of land and various automobiles belonging to the claimant. The district court granted summary judgment as to all property except three vehicles and the claimant appealed. The Ninth Circuit reversed, ruling that the claimant’s affidavits raised material issues of fact regarding the source of the money used to purchase the property. While the district court’s conclusion that some of the affidavits lacked credibility was understandable for a trier of fact, it was premature to reach the conclusion when the witnesses had not been heard in person. If the claimant and the supporting witnesses are willing to take the witness stand and under the penalty of perjury give testimony consistent with the affidavits, they are entitled to do so. The district court is not precluded by the earlier ruling on summary judgment from deciding whether or not the claimant has established innocent sources by a preponderance of the evidence. U.S. v. Two Tracts of Land, 5 F.3d 1360 (9th Cir. 1993).
9th Circuit says claimant was entitled to hearing on claim of inadequate notice of forfeiture. (920) 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 upholds government’s standing to appeal, even though property was not in its possession. (920) The district court ordered the United States to return property that was in the possession of the Beverly Hills police department, and the government appealed. On appeal, the claimant argued that the government lacked standing to appeal because the United States was not in possession of the property. Judges Schroeder, Browning and Fletcher rejected the argument, noting that the United States might reasonably be subject to sanctions for failure to comply with the district court’s order. This was sufficient to confer standing on the government. U.S. v. Huffhines, 986 F.2d 306 (9th Cir. 1993).
9th Circuit affirms that defendant had no standing to challenge forfeiture. (920) The claimant argued that although he never legally married Carlson, they lived together between approximately 1970 and 1987, and jointly purchased both the land and the mobile home. The district court rejected the argument, because the land was titled to Carlson as a single woman. The claimant asserted that he and Carlson had a verbal agreement that the land and mobile home would be equally divided if they split up. But this was rebutted by the fact that they did split up in the fall of 1987, and title to the real property remained exclusively with Carlson and title to the mobile home remained with claimant. In addition, the claimant continued to pay at least $400 per month to Carlson to use her property to operate a shake mill on the property. On these facts, the 9th Circuit upheld the district court’s finding that the claimant had no interest in Carlson’s real estate. U.S. v. Real Property Located at Section 18, 976 F.2d 515 (9th Cir. 1992).
10th Circuit affirms default judgment in forfeiture action against fugitive incarcerated abroad. (920) Defendant initiated a forfeiture action against property owned by claimant, who had previously fled the country to avoid criminal prosecution. Claimant’s notice of claim and answer to the forfeiture complaint were stricken by the district court because of claimant’s fugitive status, and default judgment was entered for the government. The 10th Circuit affirmed, embracing the fugitive-disentitlement doctrine. Claimant’s contention that he was prevented by his imprisonment in Laos from returning to the country to contest the forfeiture did not alter his fugitive status, and his claim that the government orchestrated his arrest to prevent his return was unsupported by the evidence. The district court was not obligated to lift the default judgment simply because claimant returned to the country before the district court denied his motion to set aside the default judgment. U.S. v. Timbers Preserve, 999 F.2d 452 (10th Cir. 1993).
11th Circuit holds that Rule 11 does not apply to a forfeiture provision in a plea agreement. (920) Defendant agreed as part of his plea agreement to forfeit under 21 U.S.C. section 853(a) the sum of $50,000. He claimed that Fed. R. Crim. P. 11(f) requires the trial court to determine that there is a factual basis to support the forfeiture as part of the plea. The 11th Circuit rejected this argument, holding that Rule 11 does not apply to a forfeiture provision in a plea agreement. The language of section 853(a) indicates that forfeiture is a consequence of a defendant’s drug activity rather than a determination of his culpability. Thus, a forfeiture provision in a plea agreement is not a plea to a substantive charge, but a sanction to which the parties agree as a result of the defendant’s plea. Because Rule 11(f) is applicable only to guilty pleas, a sentencing judge is not required under Rule 11 to determine whether there is a factual basis for a defendant’s concession to a criminal forfeiture pursuant to his plea bargain. U.S. v. Boatner, 966 F.2d 1575 (11th Cir. 1992).
11th Circuit holds that district court should have bifurcated civil forfeiture trial to prevent jury from hearing hearsay. (920) In a civil forfeiture action, claimant asked for a bifurcated trial: a bench trial to determine probable cause, and a subsequent jury trial on the issue of the innocent owner defense. Defendant argued that this was necessary to prevent the jury from considering hearsay that would be admissible on the issue of probable cause. The district court refused. On appeal, the 11th Circuit reversed, holding that it was error allow the government to present hearsay evidence before the jury. The judge’s curative instruction was insufficient to erase the prejudice. He did not tell the jury it could not use hearsay for the truth of the matter asserted, but told them to use the hearsay as background. The hearsay contained references to claimant’s supposed financial backings of a known drug lord, and to numerous reports detailing incidents of drug dealing near the subject property. The district court erred in refusing to bifurcate the trial. U.S. v. One Parcel of Real Estate at 1012 Germantown Road, 963 F.2d 1496 (11th Cir. 1992).
11th Circuit holds that failure to respond to requests for admissions in civil forfeiture action established that claimant used the property to facilitate drug transactions. (920) Claimant was convicted of drug charges in state court based in part upon wiretap evidence which the state court refused to suppress. In a subsequent federal civil forfeiture action brought against property owned by claimant, the government moved for summary judgment after claimant failed to respond to the government’s requests for admissions. Claimant contended that the district court could not entertain the government’s motion until it held a hearing regarding the wiretap evidence. The district court granted summary judgment because (a) claimant did not challenge the facts the government presented, and (b) claimant was collaterally estopped from raising the lawfulness of the wiretap. The state supreme court then granted certiorari to consider the state court’s resolution of the suppression issue. The 11th Circuit upheld the summary judgment in the forfeiture action, finding that the state court’s resolution of the wiretap issue was not necessary. Claimant’s failure to respond to the government’s requests for admissions conclusively established that he had used the property to facilitate drug transactions. Fed. R. Civ. P. 36 expressly provides that requests for admissions are automatically deemed admitted if not answered within 30 days and the matters therein are “conclusively established” unless the court permits withdrawal or amendment of the admissions. Even if the wiretap was invalid, the summary judgment would stand, since the order was not based on the “fruit” of any “poisonous tree” but rather on defendant’s own admissions. U.S. v. 2204 Barbara Lane, 960 F.2d 126 (11th Cir. 1992).
11th Circuit rules genuine issue of material fact existed as to whether government provided adequate notice of forfeiture. (920) The district court granted summary judgment in favor of claimant on the basis of the government’s violation of several statutory procedures, including the failure to provide adequate notice by publication. The 11th Circuit ruled that summary judgment was inappropriate because genuine issues of material fact existed as to the several matters, including whether adequate notice had been made. Contrary to the district court’s assumption, the Supplemental Rules for Certain Admiralty and Maritime Claims do not apply to gambling forfeitures. The customs laws apply, and require that the government publish notice of the seizure and the intent to forfeit for at least three weeks. The record showed that the marshals arranged for the appropriate publication, but there was no evidence that the notice was actually published. Thus, there was a genuine issue of material fact as to whether the government published adequate notice. U.S. v. Premises Located at Route 13, 946 F.2d 749 (11th Cir. 1991).
11th Circuit, en banc, upholds its in rem jurisdiction over dozer released to claimant pending government appeal. (920) The district court granted claimant’s motion for summary judgment in a forfeiture action against a dozer. In order to induce the court to release the dozer to claimant pending the government’s appeal, claimant filed an affidavit promising that he would keep the dozer within the court’s territorial jurisdiction so long as any proceeding in the case was pending. The 11th Circuit upheld its in rem jurisdiction over the government’s appeal despite the release of the dozer to claimant. Although Circuit precedent is split upon whether such a release deprives the court of jurisdiction, such cases are distinguishable. In this case, the court released the dozer on the condition that claimant keep the dozer within its territorial limits and available for seizure should the government prevail. By doing so, the court “protected its in rem jurisdiction by making [claimant] its bailee for the dozer; in effect it retained custody of the res.” U.S. v. Four Parcels of Real Property in Greene and Tuscaloosa Counties, 941 F.2d 1428 (11th Cir. 1991) (en banc).
District Court holds that in rem civil forfeiture is “remedial” and therefore applies retroactively. (920) In this civil forfeiture proceeding under the Financial Institution Reform, Recovery and Enforcement Act (“FIRREA),” the District Court noted that where Congressional intent is ambiguous, “a statute may be applied retroactively if it merely affects remedies and does not change substantive rights.” The court held that in the context of FIRREA, in rem civil forfeiture resembles a remedial measure. “In contrast to FIRREA’s criminal forfeiture and civil penalties provisions which attach to the person, 18 U.S.C. section 982, 1031, FIRREA’s civil forfeiture provisions do not focus on the individual but rather his property.” Thus the court upheld the forfeiture of the property that the claimant purchased after making false statements on his loan application prior to the effective date of the statute. The legislative scheme was remedial in nature and not substantive, and therefore could be applied retroactively. U.S. v. 403-1/2 Skyline Drive, La Habra Heights, CA, 797 F.Supp. 796 (C.D. Cal. 1992).
New York District Court rules shareholders have no standing to assert “innocent owner” defense. (920) The government filed an in rem forfeiture action against a restaurant, alleging it had been used in drug and money laundering violations. Twenty-six shareholders of the corporation that owned the restaurant filed claims, alleging that they were “innocent owners.” District Judge Glasser ruled that the shareholders had no standing to file claims, because “shareholders do not hold legal title to any of the corporation’s assets.” The court noted that if shareholders had standing, “drug dealers could set up a corporation and sell stock to innocent shareholders or to those acting in concert, who could then assert an innocent owner defense in any pending forfeiture proceeding.” “Strawmen” and “nominal” holders of legal title do not have standing, and neither do shareholders. U.S. v. New Silver Palace Restaurant, 810 F.Supp. 440 (E.D.N.Y. 1992).