380 Stays of Proceedings
Washington district court holds that stay of interlocutory sale would be granted only on condition that claimant posts $975,000 supersedeas bond. (380, 640) Claimant moved to stay the interlocutory private sale of her property pending appeal. She argued first that she had a likelihood of success on appeal, but she provided no factual basis supporting this contention, and had defaulted on her obligations under the note and deed of trust before the property was even seized. Meanwhile, the liabilities secured by it – a promissory note and County property taxes – were both increasing. All concerned would benefit if the property were sold and these underlying obligations were retired. Also, the claimant never lived there, but bought the 53-acre parcel to develop and had preliminary plat approval for subdivision into numerous lots. Since the property never was or would be the claimant’s home, there was nothing of personal or intrinsic value in this property to her. Finally, the property had not been maintained, taxes were not being paid, the underlying debt was not being paid, and squatters and vandals were a continuing problem. The court concluded that if a stay were ordered, it had to be bonded, since the asset was clearly deteriorating through neglect. Thus, it held that it would stay the sale only if the claimant filed a supersedeas bond in the amount of $975,000.00 within 10 days. If not, the sale will go forward. United States v. Real Property Located at 16549 Vail Road SE, Yelm, Washington, No. C14-5231RBL, 2018 WL 4510064 (W.D. Wash. Sept. 20, 2018).
New York district court denies government’s motion to stay civil forfeiture proceedings since all the government offered were possibilities and speculation that civil discovery could affect the related criminal matters. (380) The government commenced a civil forfeiture action against $3,592.00 in cash and moved to stay discovery under 18 U.S.C. §981(g)(1) because a federal grand jury indicted the claimant about three months earlier for drug violations. In determining whether the forfeiture case was related to the criminal case, the court looked to the degree of similarity between the parties, witnesses, facts, and circumstances involved in the two proceedings, without requiring an identity with respect to any one or more factors” as per §981(g)(4). Count 2 of the Indictment alleged that the claimant maintained a location in Rochester, New York for the purpose of manufacturing and distributing cocaine and cocaine base, the same date and location that the forfeiture alleged the subject currency was seized, so the court easily concluded that the cases were indeed related. To obtain a stay of the civil case, however, the government must also demonstrate that civil discovery will adversely affect the ability of the government to conduct the prosecution of a related criminal case. Importantly, the government’s burden is not simply to show that civil discovery could adversely affect the criminal case, but to show that civil discovery will adversely affect the criminal case. Here, the government did not make the required showing. It argued that a stay was necessary to protect the government’s witnesses, including case agents and investigators, from depositions in the civil case, which could be used by the claimant/defendant in the criminal case – a right that he clearly does not have under the criminal prosecution. Similarly, since the claimant was pro se in this matter, the government believed that a stay was necessary to preserve his rights under the Fifth Amendment. The problem with this argument was that it eviscerates the statute’s requirement of demonstrating that civil discovery will adversely affect a related criminal case. All the government offered were possibilities and speculation. If Congress wanted all related civil forfeiture actions to be stayed based on the possibility that civil discovery could affect the related criminal matters, the statute could have easily provided for that. But Congress chose a different standard, and to warrant a stay, the government must satisfy the standard that the statute requires. It might be that once discovery commenced that the government’s predictions would prove true. And if they did, the government (or claimant) would be free to file a renewed motion to stay discovery. But to grant a stay on the record, without any specific showing and when no lesser alternatives (such as a protective order, or preliminarily limiting discovery to certain areas or types) had even been attempted, would be inconsistent with the standard articulated by the statute. The court further noted that the Indictment contained a forfeiture allegation, which listed only a firearm and rounds of ammunition as being subject to forfeiture in the criminal case. The court stated that while it is the government alone who makes charging decisions, it could not overlook the fact that the subject currency was conspicuously absent from the criminal Indictment, despite the existence of parallel criminal forfeiture statutes that would allow the government to seek forfeiture of the subject currency in the related criminal case. Nevertheless, the court denied the motion to stay without prejudice. United States v. $3,592.00 United States Currency, 2016 WL 5402703 (W.D.N.Y. Sept. 28, 2016).
New Jersey district court denies claimant Russian bank’s motion to stay civil forfeiture proceedings and expedite administration petition process, in part because bank was withholding information relevant as to whether it had statutory standing. (270, 320, 380) Sberbank of Russia moved to stay a civil forfeiture action and for an order requiring the Department of Justice to expedite its review of the bank’s request to have the forfeiture action terminated. Brazhnikov earlier pled guilty to charges in which he admitted to unlawfully exporting restricted items to Russian purchasers and concealing his illicit operation by making false statements and engaging in wire fraud. He had made three transfers totaling $1,880,000 through a shell company to two personal bank accounts he held at Sberbank, the largest bank in Russia and one of the largest banks in the world. The FBI seized the money from Sberbank’s interbank account held at Deutsche Bank Trust Company Americas. Sberbank submitted an administrative petition to the Attorney General and sought to terminate the forfeiture pursuant to 18 U.S.C. §981(k)(1)(B). Sberbank’s petition was later transferred to DOJ’s Asset Forfeiture & Money Laundering Section, which served special interrogatories on Sberbank, whose answer to the complaint for forfeiture noted that Russia’s bank secrecy laws prevented it from disclosing account balances and customer transaction records. This meant it could not confirm or deny any alleged deposits into its accounts, or demonstrate that it may have discharged all or part of its obligations to any depositor prior to the seizure. Under §981, if a foreign financial institution has an interbank account in the United States with a covered financial institution, any seizure warrant regarding the funds may be served on the covered financial institution, and funds in the interbank account at the foreign financial institution may be seized. The statute also provides that if a forfeiture action is brought against funds seized from an interbank account, it is not necessary for the government to establish that the funds are directly traceable to the funds that were deposited into the foreign financial institution. Moreover, the statute allows only the owner of the funds deposited into the account at the foreign financial institution to contest the forfeiture. The term “owner” does not include the foreign financial institution (in this case, Sberbank) unless the basis for the forfeiture action is wrongdoing committed by that institution, or the institution establishes it had discharged its obligation to the prior owner of the funds. Here, the second exception was potentially in play, unless the Attorney General agreed to terminate or suspend the forfeiture because a conflict of law existed between the United States and Russia concerning liabilities resulting from forfeiture of the interbank funds, and if it would be in the interest of justice and not harm the national interests of the United States. The court, however, denied Sberbank’s motions because it produced evidence showing it discharged its obligations to Brazhnikov prior to the seizure of the funds, and it asserted objections to the special interrogatories based on Russian bank secrecy laws, seeking to stay forfeiture proceedings but withholding information relevant to whether it had statutory standing to seek judicial relief in the first place. The court said the entire statutory scheme would be frustrated if criminals used foreign institutions that operated under strict bank secrecy laws. Sberbank did not simply seek discovery as to statutory standing, but tried to leapfrog the standing requirement altogether by suspending the forfeiture proceeding without having to prove ownership under §981(k)(4)(B). Also, while the Attorney General’s review may not be as swift as Sberbank would like, its petition still was actively being considered. United States v. $1,879,991.64 Previously Contained in Sberbank of Russia’s Interbank, 2016 WL 2651424 (D.N.J. May 10, 2016).
North Carolina district court grants stay of discovery only and not full proceedings so as to allow determination of claimant’s summary judgment motion based on lack of probable cause when civil forfeiture complaint was filed. (380) The government filed a forfeiture complaint and three claimants filed claims alleging ownership and possessory interests in the seized funds. The government filed a motion to stay the case, pursuant to 18 U.S.C. §981(g)(1), contending that civil discovery would impede an ongoing criminal investigation. The court stayed the case until the parties filed a joint motion to amend the Case Management Order proposing a new discovery deadline, which the court granted. Claimants filed a motion for summary judgment. One week prior to the close of discovery, claimants filed a motion to stay discovery pending resolution of their motion for summary judgment. In response, the government filed another motion to stay the entire proceedings. To date, discovery had not been concluded and the government filed no response to claimants’ motion for summary judgment. Because all parties consented to a stay of discovery until at least resolution of claimants’ motion for summary judgment, the court granted such a stay. To assist the parties in their planning, the court noted that it would not decide claimants’ motion for summary judgment in its entirety prior to the completion of all discovery. Claimants’ motion rested on two alternative grounds. First, they contended the government did not have probable cause at the time it initiated the lawsuit, and thus was not entitled to conduct further discovery. Second, claimants contended the government could not sustain its ultimate burden of proof under 18 U.S.C. §983(c). Claimants’ first argument was potentially dispositive of the case. If the pre-suit probable cause requirement, found at 19 U.S.C. §1615, survived the 2000 amendment to 18 U.S.C. §983(c), which put in place a preponderance of the evidence burden of proof, and the government could not satisfy that requirement, then the court must dismiss the case. Accordingly, the court directed the government to file a reply to claimants’ motion for summary judgment, insofar as it rested on the pre-suit probable cause requirement. In any event, claimants’ second argument was not susceptible to address absent full and fair discovery. After resolution of claimants’ motion for summary judgment grounded in the government’s purported lack of probable cause, the court said it would grant the parties additional time to complete discovery and to litigate the summary judgment motion. United States v. $307,970.00, in U.S. Currency, 2015 WL 4066409 (E.D.N.C. July 2, 2015).
Nevada district court denies second extension of stay of civil forfeiture case because of claimants’ due process right to obtain a judicial determination; disclosure of identities of confidential informants and other confidential information could be guarded against by a protective order. (380) The Government filed complaints for forfeiture and ex parte motions to seal and stay the civil actions pending the completion of an ongoing related criminal investigation. The Court granted the motions, and the actions remained sealed and stayed until the court granted the government’s motion to unseal and lift the stay. The government thereafter served the complaints and claimants filed their verified statements of claim and answers. The government then filed a motion to again stay discovery pending the completion of a related criminal investigation, which apparently was prompted by the claimants’ service of broad ranging requests for production of documents and interrogatories. The court granted the motion in part by limiting the duration of the stay for 90 days. The court ordered that if the government moved for another extension, it should show either that criminal charges had been filed or that the filing of such charges was imminent. When the government again moved for a stay at the end of the 90 days, and the claimants opposed, the court found that while the claimants did not show that their ability to defend the forfeiture action was prejudiced by the loss of evidence or witnesses, a further stay raised a legitimate issue regarding the claimants’ due process right to obtain a judicial determination whether their assets should be forfeited. The evidentiary issues relating to both the civil forfeiture actions and in the related criminal investigations or prosecutions appeared to be well known to both the government and the claimants. While some discovery may require the government to produce witnesses or evidence in support of its position that the subject products were controlled substance analogues, there did not appear to be any need for the government to disclose the identities of confidential informants or other confidential information that had been or was being developed during ongoing criminal investigations. The disclosure of such information could also be guarded against by a protective order. Although the claimants previously served broad ranging discovery requests, their counsel said he was willing to work with the government to reach a mutual agreement on the scope of any necessary discovery. The court was not persuaded that the government’s criminal investigation would be adversely affected if the stay were lifted, subject to entry of a reasonable protective order, as necessary, to protect against the disclosure of confidential information relating to the government’s ongoing criminal investigation. Thus the requested additional stay was denied. United States v. $177,844.68 in U.S. Currency, 2015 WL 355495 (D. Nev. 2015)(Jan. 27, 2015).
5th Circuit reverses stay of forfeiture proceedings where government failed to satisfy statutory requirements. (380) The government filed forfeiture actions against a shopping center and two residences, alleging that they constituted proceeds traceable to sales of illegal drugs. The government then obtained a stay of all proceedings pending the outcome of a criminal conspiracy case in the central district of California. None of the petitioners were named in the California case, and the 5th Circuit found that the petitioners would be deprived of the use of their property including their residence, for what could be a very long time, without ever having had an opportunity to know the evidence against them, challenge it, or even to have a hearing. Under the circumstances, the 5th Circuit concluded that the extraordinary remedy of mandamus was appropriate. The case was remanded to the district court to reconsider the stay and to consider the claimant’s pending motion to dismiss the forfeiture complaint against their residences. In re Ramu Corporation, 903 F.2d 312 (5th Cir. 1990).
7th Circuit upholds refusal to stay civil forfeiture pending resolution of criminal charges. (380) 7th Circuit found no error in the district court’s denial of claimant’s motion for a stay in his civil forfeiture action pending resolution of the state criminal charges. Claimant waived this issue by agreeing to try the forfeiture action on stipulated facts. Moreover, even if claimant’s failure to object did not constitute a waiver, he would not be entitled to a stay. Although the 5th Amendment privilege against self-incrimination is applicable in civil forfeiture actions, a blanket assertion of the privilege is no defense to a forfeiture proceeding and would not provide a sufficient basis for the issuance of a stay. “The very fact of a parallel criminal proceeding . . . does not alone undercut [claimant’s] privilege against self-incrimination, even though the pendency of the criminal action ‘forces him to choose between preserving his privilege against self-incrimination and losing the civil suit.'” U.S. v. Certain Real Property, Commonly Known as 6250 Ledge Road, Egg Harbor, WI, 943 F.2d 721 (7th Cir. 1991).
7th Circuit upholds denial of motion for continuance in forfeiture case. (380) The district court denied claimant’s motion for a continuance of the summary judgment proceedings in a forfeiture action. Claimants contended that the stay of discovery which the government had been granted during the pendency of a related criminal investigation made it impossible for claimants to obtain evidence with which to oppose the government’s motion. In particular, claimants were unable to depose two government agents who had provided information concerning illicit gambling activities which took place in the building in question. The 7th Circuit found that the denial of the motion for a continuance was not an abuse of discretion. Claimant did not identify the information that it hoped to gain by deposing the adverse witnesses. This was merely a case of a party “seek[ing] to avoid the entry of an adverse judgment by raising the unlikely possibility that, upon further discovery, an adverse witness may contradict an earlier statement or volunteer an admission.” U.S. v. On Leong Chinese Merchants Association Building, 918 F.2d 1289 (7th Cir. 1990).
10th Circuit holds that statute does not require injunction on claimant’s motion. (380) Claimant filed a motion for an injunction against the sale of forfeited property pending appeal. He argued that once he made the motion, 28 U.S.C. §1355(c) instructs the court to enter the stay without regard to the strength of his argument that he had a valid interest in the property. The Tenth Circuit held that the statute did not require the injunction, and that the necessity of the stay would be determined under the same four‑part test applied in other cases. Claimant must show that he is likely to prevail on the merits, will be irreparably harmed in the absence of a stay, other parties will not be harmed by the entry of a stay, and the public interest favors a stay. Claimant’s conclusory argument that he was an innocent owner was insufficient to demonstrate that he was likely to succeed on appeal. U.S. v. Various Tracts of Land in Muskogee and Cherokee Counties, 73 F.3d 747 (10th Cir. 1996).
10th Circuit holds that jeopardy does not attach before adjudicative hearing or settlement. (380) On October, the government filed a civil forfeiture complaint against defendant’s property. In November, defendant was indicted on drug charges. On government motion and over defendant’s objection, the civil forfeiture case was stayed pending the outcome of the criminal case. Defendant argued that his criminal conviction following the institution of civil forfeiture proceedings subjected him to multiple punishments for the same offense. The Tenth Circuit disagreed, holding that jeopardy does not attach in a civil forfeiture case until an adjudicative hearing, at least where a defendant does not settle the case and thus does not incur a civil punishment before a hearing. Since the civil case never got to a hearing or a settlement, jeopardy did not attach. U.S. v. McDermott, 64 F.3d 1448 (10th Cir. 1995).
11th Circuit upholds denial of motion to stay forfeiture pending resolution of criminal prosecution. (380) Claimant argued that the district court abused its discretion by denying her request for a stay of civil forfeiture proceedings pending resolution of a criminal prosecution against her. The 11th Circuit found no abuse of discretion, concluding there was no real conflict between the forfeiture and claimant’s 5th Amendment rights. Claimant did not show that invocation of her 5th Amendment rights resulted in the civil forfeiture judgment against her. Claimant stipulated to probable cause and then rested, providing no evidence to support a defense to the forfeiture. Claimant did not explain why she did not use the testimony of other parties to substantiate her defense. She failed to examine the persons whose hearsay statements provided the government with probable cause for the forfeiture order. Claimant’s basis for the stay was nothing more than a blanket assertion of the privilege against self-incrimination. U.S. v. Lot 5, Fox Grove, Alachua County, Florida, 23 F.3d 359 (11th Cir. 1994).
California district court certifies order denying discovery protective order for interlocutory appeal, since issue of Fifth Amendment privilege for corporate principals was novel and would materially affect outcome of the litigation. (380) The government alleged in a civil forfeiture complaint that the claimants operated a marijuana store on real property. Counsel for one claimant requested that the government provide him with some form of immunity because his deposition would likely implicate his Fifth Amendment privilege against self-incrimination, but the government refused. The claimant moved for a protective order limiting any discovery pertaining to the principals of the business to be used solely for the purposes of conducting the litigation and not in connection with any criminal prosecution or, in the alternative, for a stay of any discovery pertaining to the principals. In denying the motion, the court noted that district courts should make special efforts to accommodate the constitutional privilege against self-incrimination as well as the legislative intent behind the forfeiture provision; however, it stated that it was not necessary to make an accommodation in the present case because the corporation owner had no Fifth Amendment privilege against self-incrimination, and although the principals possessed such a privilege, they had no claim to the property. Claimants thus moved for an order certifying the order for interlocutory appeal and staying the case pending resolution of the appeal. The court found that its prior order denying the requested protective order involved a controlling question of law since it was not resolved through an exercise of the court’s discretion, but on a legal determination. Whether a district court applied the correct legal standard in determining whether to grant a protective order is a legal issue that is reviewed de novo by the Ninth Circuit. Indeed, that Court has accepted interlocutory appeals from district court orders involving whether to grant a protective order. Further, the court said that resolution of this legal issue could materially affect the outcome of the litigation, since the principals’ assertion of their Fifth Amendment rights could hinder the corporate owner’s ability to effectively defend itself. In fact, the government recently had filed a motion for summary judgment as to the claimants’ affirmative defenses, and argued that because the claimants have asserted the Fifth Amendment privilege against self-incrimination, they cannot present any evidence to support their alleged defenses. Therefore, whether the court was required to provide an accommodation in the form of a protective order could potentially be outcome dispositive. In addition, the controlling issue of law was a novel issue and presented a difficult question of first impression on which fair-minded jurists might disagree, since the court could not find any authority on the precise issue in any court of appeals. Thus, there was a substantial ground for difference of opinion as to the controlling issue. Finally, the court concluded that an immediate appeal would materially advance the termination of the litigation, and other cases, since there were at least three other pending forfeiture cases in this district involving medical cannabis dispensaries, and the government did not contest that these cases would likely confront the same issue. Accordingly, the court certified its order for interlocutory appeal to the Ninth Circuit and stayed the action pending resolution of the appeal. United States v. Real Prop. & Improvements Located at 2441 Mission St., San Francisco, California, 2014 WL 1350914 (N.D. Cal. 2014) (Apr. 4, 2014).
California district court denies protective order and stay of discovery of principals of medical marijuana store, because claimant corporation had no Fifth Amendment privilege against self-incrimination and store operators were not claimants. (380) The Shambala Healing Center (“SHC”) operated a marijuana store on real property in San Francisco. The government filed a civil forfeiture action. Shawa was one of the proprietors. Numerous parties, including SHC, filed claims; however, Shawa did not. Counsel for SHC and Shawa learned the government intended to notice the deposition of Shawa, and requested that the government provide him with some form of immunity because his deposition would likely implicate his Fifth Amendment privilege against self-incrimination. After the government refused, SHC and Shawa moved for a protective order limiting any discovery pertaining to the principals of SHC to be used solely for the purposes of conducting the litigation and not in connection with any criminal prosecution. In the alternative, SHC and Shawa moved for a stay of any discovery pertaining to the principals of SHC. In response, the government argued there was no Fifth Amendment dilemma because Shawa was not a party to the action and SHC was a corporation and does not possess a Fifth Amendment privilege. The court agreed. Because SHC as a corporation has no right to remain silent, it did not face the dilemma of whether to remain silent and allow the forfeiture or testify against the forfeitability of its property and expose itself to incriminating admissions. SHC’s principals also faced no such dilemma, because they had no claim to the properties. Thus, the court said it was not required to make special efforts to accommodate the claimant’s constitutional privilege against self-incrimination. Although the court recognized that the principals’ assertion of their Fifth Amendment rights could hinder SHC’s ability to effectively defend itself in this action, SHC’s situation was not any more dire or unfair than that of any other party who cannot find witnesses to testify on his behalf. A criminal defendant on trial for his liberty—or even his life—is often faced with the problem that others involved in events related to the alleged crime will invoke the privilege rather than testify. The court noted that the SHC’s present circumstances were simply the result of choosing the corporate form. The court further held that 18 U.S.C. §981(g)(2) did not mandate a stay of the proceedings since Shawa was not a claimant and SHC does not possess a Fifth Amendment right against self-incrimination. The court also declined to grant a discretionary stay of the action, since the government had an interest in the prompt resolution of the action and the action had been pending for almost nine months, the court had an interest in clearing its docket, the government and the public had an interest in proper enforcement of the forfeiture laws, and there was nothing in the record suggesting that indictments were imminent. United States v. Real Prop. & Improvements Located at 2441 Mission St., San Francisco, California, 2014 WL 492481 (N.D. Cal. 2014) (Feb. 4, 2014).
District of Columbia district court denies stay in favor of protective order since government offered no evidence it could not take discovery because of the pending criminal investigation, and merely speculated about how civil discovery would adversely affect its criminal investigation. (380) The government filed a civil forfeiture action alleging that approximately $63 million in three different banks were the proceeds of a wire fraud conspiracy, and then moved under 18 U.S.C. §981(g)(1) to stay the civil forfeiture proceeding until the conclusion of the related criminal proceedings, except for any forthcoming government motions to strike under Supplemental Rule G(8)(c). Because a protective order can protect the interests of the parties, the court held that a complete stay was unjustified and denied the government’s motion. All the accounts except one were held in the name of companies, rather than individuals. Some claimants also moved under 18 U.S.C. §983(f) for immediate release of funds. Since a criminal investigation and the civil forfeiture action had common facts, similar alleged violations and some common parties, the court held that the actions were clearly related. Here, the claimants not only tried to identify confidential informants, but they also requested statements of the confidential informants via interrogatories, as well as statements from other witnesses, which they would not necessarily be entitled to in criminal discovery. However, the government did not point to any requests to depose law enforcement officials, or how other particular requested discovery would adversely affect the investigation. It also offered no evidence that destruction of evidence was likely. Thus, it said a well-crafted protective order limiting discovery could protect the interest of the government while preserving the ability of the claimants to pursue the civil case. There were several areas in which the claimants could seek discovery that would not implicate the sensitive information that the government sought to protect, such as additional information about the applicability of international comity, the act of state doctrine, or the innocent owner defense. The government argued that civil discovery might have the effect of inappropriately allowing claimants to conduct discovery while the government would be unable to take discovery from the persons with pertinent knowledge of the facts because the witnesses might claim the Fifth Amendment privilege against self-incrimination. Yet, the government offered no evidence that any witness had claimed the Fifth Amendment, and no indictment had yet been returned. Since the government offered no evidence that it could not take discovery because of the pending criminal investigation, its arguments did nothing more than speculate about how civil discovery would adversely affect its criminal investigation. United States v. Sum of $70,990,605, 2014 WL 1509453 (D.D.C. 2014) (Apr. 17, 2014).
Florida District Court holds that government made sufficient showing that civil discovery would interfere with criminal investigation to warrant stay. (380) Government filed civil forfeiture action against funds held in bank accounts being used to launder the proceeds from counterfeit checks and other fraudulent activities. A parallel criminal investigation was ongoing when the civil action was filed. The government moved for and was granted a stay of civil forfeiture during the pendency of the related criminal investigation. The claimant account holders, who were indicted for parallel criminal money laundering violations, moved for the stay to be reconsidered. The Southern District of Florida district court analyzed the relatedness of the civil and criminal case. The Court held that neither the parties nor the facts in the civil and criminal case need to be identical for the two cases to be considered related. The Court noted that the government made a sufficient showing that civil discovery would interfere with the criminal investigation to warrant the stay of the forfeiture proceedings because the investigation and civil forfeiture action had common facts, similar violations, and some common parties. Also, the Court noted that questions contained in the claimant’s motion to compel in the civil case required answers by federal agents related to the criminal investigation. Motion to reconsider stay of discovery denied. U.S. v. GAF Financial Services, Inc., 2004 WL 2091361 (Sept. 13, 2004).
Georgia district court denies stay based on Fifth Amendment rights against self-incrimination because defendants failed to first file a verified claim, but grants an extension to file response to complaint. (380) The government filed a civil forfeiture action to seize various bank accounts and property allegedly involved in money laundering or derived from unspecified unlawful activity, contending that the Yellow Page Directory Publishers, Inc. (“YPDPI”) mailed unsolicited, fraudulent bills to numerous businesses and churches designed to mimic legitimate local Yellow Pages directory providers in the hope that these entities would mistakenly pay YPDPI. Payments were ultimately forwarded to the same Miami, Florida address. Because the two principals of YPDPI faced parallel criminal and civil investigations, they asked the Court pursuant to 18 U.S.C. §981(g)(2) to stay the civil forfeiture proceedings until the Government’s criminal investigations were complete. The Government argued that the defendants did not file a verified claim and thus lack the requisite statutory standing necessary to assert a claim in a forfeiture suit, and that the parallel criminal and civil proceedings nevertheless do not violate defendants’ Fifth Amendment rights against self-incrimination. The court found that Supp. Admiralty and Maritime Claims Rule C(6) requires that a verified claim be filed within a certain time period to confer statutory standing upon a claimant, and a defendant must affirmatively state his interest in the property at issue. This burden is minimal and does not require defendants to explain in any detail the nature of their interest. Thus, the court held that the defendants did not comply with the requirements set forth in C(6), and their anticipated Fifth Amendment defense is not a substitute for meeting the statutory requirement to show standing, and thus denied the requested stay. Moreover, the mere existence of parallel, criminal and civil proceedings does not violate one’s constitutional rights. When a defendant makes no showing or explanation of how the introduction of evidence would have prejudiced him, he cannot rest on the Fifth Amendment to invalidate forfeiture proceedings. However, the court used its discretion to grant the defendants an extension to file a response to the complaint, because forfeiture is a harsh penalty, especially when the outcome is forced because of technical and procedural errors. U.S. v. $153,968.16 Seized from Bank of America, 2007 WL 879422 (N.D. Ga. 2007) (March 21, 2007).
Georgia Bankruptcy Court says automatic stay applies to state civil forfeiture actions. (380) The debtors in this bankruptcy action were arrested by Georgia narcotics officers for drug violations. Georgia also filed a state forfeiture proceeding against the debtors’ residence (at which the alleged drug transaction occurred). Shortly thereafter, debtors filed this Chapter 13 bankruptcy petition and an automatic stay was entered, 11 U.S.C. §362. Georgia petitioned the bankruptcy court for relief from the stay on the theory that the state forfeiture action fell under the police and regulatory power exception of 11 U.S.C. §362(b)(4). The court concluded that, “[a]s an in rem action against property rather than the debtor himself, civil forfeiture a fortiori cannot constitute an action” of the type to which the police power exception applies. Accordingly, the court declined to lift the stay. [Ed. Note: This opinion contains an excellent discussion of the complex intersection of forfeiture and bankruptcy law with citations to a wide range of authorities.] Bell v. Bell, 215 B.R. 266 (N.D. Georgia 1997).
Kentucky district court denied stay in gun forfeiture case to await results of cases in other states involving similar weapons. (380) BATF agents seized firearms marketed as MKS M-14s from the owner, and the owner filed a claim pro se. The BATF determined that the guns were machine guns with the meaning of the National Firearms Act (NFA); it is unlawful for any person to possess a machine gun that is not registered to that person, and the seized guns were not registered to the claimant or any other person. The claimant filed a motion to stay the civil forfeiture action pending the outcome of similar actions in West Virginia and Arizona, asserting that the records from those pending cases would be available to the claimant which he would not be able to produce on his own. The Eastern District of Kentucky district court found that the records of similar pending proceedings would not likely be of much help and, because there is no controlling case law to the contrary, denied the motion to stay. The government moved for summary judgment, contending that there was evidence that the M-14 rifle could be converted to fire more than one round per trigger pull through less than one day of work in a properly equipped workshop. The government also alleged that the required registration of the firearm with the NFRTR had not been made. This case contains an analysis of the definition of “machine gun” under the NFA. Government’s motion for summary judgment granted. U.S. v. One TRW Model M14, 7.62 Caliber Rifle, 2003 WL 22885406 (E.D. Ky., Nov. 26, 2003).
Louisiana District Court grants stays pending appeal. (380) In two separate cases, the court had dismissed the government’s forfeiture action for want of probable cause. The government sought and the court granted stays of the dismissal orders pending appeal. The court observed that 28 U.S.C. ? 1355(c) appears to mandate the issuance of a stay at the request of the losing party by declaring that a stay “shall” issue whenever necessary “to preserve the right of the appealing party to the full value of the property.” While noting that other circuits have held the issuance of a stay discretionary, see, e.g., U.S. v. Various Tracts of Land in Muskogee and Cherokee Counties, 74 F.3d 197 (10th Cir. 1996), the district court granted the stays. It relied particularly on the fact that the property at issue was readily dissipated cash. U.S. v. $14,876.00 U.S. Currency, 1998 WL 37522 (E.D. La. 1998) (not reported in F.Supp.).
New Jersey district court denies motion for stay without prejudice because claimants did not address whether they have Article III standing, and their mere assertion of ownership, without more, was insufficient. (320)(380) The government filed a complaint seeking civil forfeiture of $410,000.00 seized from a vehicle operated by Haim Shamah while traveling on the New Jersey Turnpike. Shamah told police that the money was given to him at a Synagogue/Jewish School in Myrtle Beach, South Carolina. The complaint contended it was drug money. Three individuals filed claims (Wilkes for $159,700.00, Shitrit for $186,000.00 and Halbersberg for $64,300.00). Claimants sought to stay the civil forfeiture proceeding until any related criminal investigation concludes. The Government contended that the claimants were not the subject of any related criminal investigation referenced in the forfeiture complaint and that the claimants did not have standing to assert a claim. Although the government conceded the claimants satisfied the requirement for statutory standing pursuant to Rule G(5) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, it argued the claimants failed to demonstrate that they had Article III standing, and that they thus were not entitled to request a stay, because the only person it knew to have had control over the money was Shamah, not the claimants. The government further asserted that to satisfy the standing requirement, the claimants must respond to special interrogatories provided so that they may demonstrate a “valid ownership interest” in the money. Claimants countered that they have standing sufficient to satisfy the requirement of 18 U.S.C. § 981(g)(2)(B) to request a stay because they filed sworn statements of their ownership interest. The court stated that it had to determine whether statutory standing is sufficient or whether a claimant must also demonstrate standing under Article III of the Constitution. To establish statutory standing, a claimant must comply with Rule G(5), by filing a claim within a certain time period and by setting forth therein the claimant’s interest in the property. Once a claimant has met the statutory standing requirement, he still must make a prima facie showing that he has Article III standing in order to contest a forfeiture, i.e., a legally cognizable interest in the property that will be injured if the property is forfeited to the government, the requisite ‘case or controversy’ standing to contest forfeiture. He must make a prima facie showing that he exercises “dominion and control” over the res; a claim of bare legal title is insufficient to establish Article III standing. Thus, before the court may grant a stay, the claimants must demonstrate that they have both statutory and constitutional standing to assert a claim over the property. The court concluded that the claimants failed to meet that burden because they did not address whether they have Article III standing; their mere assertion of ownership, without more, was insufficient, and denied the claimants’ motions for a stay without prejudice. The court also granted the government’s cross-motion to compel claimants to respond to the special interrogatories pursuant to Rule G(6). U.S. v. $410,000.00 In U.S. Currency, 2007 WL 4557647 (D.N.J. 2007) (December 21, 2007).
New Jersey District Court says stay pending appeal of forfeiture ruling is not mandatory. (380) The district court granted Manchester Fund, Ltd. summary judgment on the ground that it was the innocent owner of property the government sought to forfeit. The government requested a stay pending appeal, pursuant to 28 U.S.C. §1355(c) and Fed. R. Civ. P. 62(d) and (e). Section 1355 says, “Upon motion of the appealing party, the district court … shall issue … a stay of the judgment … pending appeal.” The district court followed the Tenth Circuit in holding that “shall” does not mean must. U.S. v. Various Tracts of Land in Muskogee and Cherokee Counties, 74 F.3d 197, 198 (10th Cir. 1996). It applied a four-part test to determine whether a stay should be granted. The government showed prejudice because the property would be sold before an appeal could be completed. Nevertheless, the district denied the stay, finding dispositive the weakness of the government’s position on the merits. In addition, the claimant would be prejudiced by the delay caused by the appeal, and there was a public interest in permitting innocent owners to dispose of their property freely. U.S. v. 1993 Bentley Coupe, 1997 WL 803914 (D. N.J. 1997) (not reported in F.Supp.).
Ohio district court denies stay of forfeited real property on appeal because claimant owner failed to show likelihood of success, harm to him during 11-year prison sentence, lack of harm to government, or that public interest favored a stay. (380) After the government filed a complaint for forfeiture against real property in Ohio, and the title owner Gillingham filed a claim, the Court granted summary judgment to the United States and ordered the property forfeited. Gillingham moved to stay execution of the judgment pending his appeal. Section 1335(c) of Title 28 provides that where a final order disposing of property in a civil forfeiture action is appealed, the district court shall issue any order necessary to preserve the right of the appealing party to the full value of the property at issue, including a stay of the judgment of the district court pending appeal or requiring the prevailing party to post an appeal bond. That section also provides that removal of the property by the prevailing party does not deprive the court of jurisdiction so a stay of the forfeiture is not necessary to assure appellant court jurisdiction. While the plain language seemed to require the court to issue a stay pending appeal if necessary to preserve the full value of the property, courts still have applied a four-part test for determining whether to grant a stay: the appellant must show that 1) he is likely to prevail on the merits on appeal, 2) he will be irreparably harmed in the absence of a stay, 3) other parties will not be substantially harmed by the entry of a stay, and 4) the public interest favors a stay. Gillingham offered no argument regarding any of the factors and simply concluded that there will be no harm to anyone because the property is a parcel of real estate and cannot disappear or vanish, and made the simple statement that substantial issues were presented in the appeal. However, there was no evidence that Gillingham would suffer irreparable harm if the stay was not granted, since he was sentenced to 11 years in prison and is not expected to be released until 2015. He did not show that the property is special or irreplaceable. Further, should he prevail on appeal, he would be entitled to compensation of the full value of the property. Moreover, the court found that the United States would be harmed if the stay is granted because it was likely that the property would decline in value during the appeal, and when the property was initially searched in conjunction with the investigation into Gillingham’s actions, the interior was filthy and unkept, and although the U.S. Marshal entered into a rental agreement with the occupants, they moved out shortly thereafter and the residence was sitting vacant. Also, keeping the residence vacant or as a rental unit would likely cause it to decrease in value, and granting a stay would increase the burden on and expenses of the U.S. Marshal and, in fact, the same harm to the United States would be harm to Gillingham if his appeal is successful. Finally, the only affected public interest identified by either of the parties was the United States’ interest in enforcing the forfeiture laws, particularly important in this case where Gillingham was convicted of gross sexual imposition of a minor child and used the privacy of the residence to commit that crime. Also, the interest of local law enforcement in receiving a share of the proceeds of forfeited assets would be impacted by a delay in disposal of the residence. Accordingly, the court denied the stay. U.S. v. 7046 Park Vista Road, 2008 WL 2357339 (S.D.Ohio 2008) (June 5, 2008 ).
Pennsylvania District Court denies government’s motion to stay judgment pending appeal. (380) Claimant’s car was seized for civil forfeiture, but she was granted summary judgment as an innocent owner and granted permission to recover the car. The government filed a notice of appeal and then requested to stay the judgment pending the appeal in order to assure the preservation of the condition and value of the car. The M.D. Pennsylvania District Court analyzed four factors: likelihood of success on appeal, irreparable harm absent a stay, harm to claimant, and public interest—and denied the government’s motion to stay pending appeal. The M.D. Pennsylvania District Court did, however, impose on her the restriction that she may not sell or dispose of the car pending the appeal. U.S. v. 2001 Honda Accord EX, 2003 WL 1339957 (M.D. Pa. Mar. 18, 2003).
Texas District Court denies government’s motion to stay civil forfeiture during a related criminal investigation. (380) During an ongoing three-year criminal fraud investigation, the government filed a related civil forfeiture action and seized funds in a bank account and a yacht belonging to the targets of the investigation. The government filed a motion to stay civil discovery during the pending criminal investigation the day after it filed the forfeiture complaint. The government’s arguments were speculative at best about how civil discovery would adversely affect its criminal investigation. The Northern District of Texas District Court, noting that the government failed to point to any specific discovery request or abuse that had taken place, denied the government’s motion to stay the civil proceeding. U.S. v. All Funds ($357,311.68) Contained in Northern Trust Bank of Florida Account, 2004 WL 1834589 (N.D. Tx., Aug. 10, 2004).
CAFRA broadens stay relief, both to the government or to defendant seeking to preserve testimonial rights. (380). The government filed a civil forfeiture complaint and seized funds from accounts held by a fuel corporation that was subsequently investigated for wire and mail fraud.Soon after a search warrant was executed at the company, the government filed a motion to stay the civil forfeiture proceedings, arguing that to allow civil discovery would prejudice the ability of the government to continue its related criminal investigation. The stay was granted. The district court analyzed the amended CAFRA provisions that have significantly broadened stay relief to the period of investigation. CAFRA no longer requires that an indictment or information be filed. CAFRA has also broadened a defendant’s stay relief to preserve testimonial rights to avoid disclosure of information. Noting that a stay cannot be upheld for an indefinite period of time, the district court denied the defendant’s motion to reconsider the government’s stay. U.S. v. All Funds Deposited in Account No. 20000524845, 162 F.Supp.2d 1325 (D. Wyo. 2001).