Sixth Circuit Approves NonDetailed Allegations of Ownership in Making Claim for Seized Property Sought to be Forfeited (9/24/17)

In United States v. $31,000 in U.S. Currency, ___ F.3d ___, 2017 U.S. App. LEXIS 18159 (6th Cir. 2017), here, the Sixth Circuit rendered an important decision for claimants in in rem forfeiture proceedings in the Sixth Circuit.  The Court summarizes its holding in the opening two paragraphs of the opinion:

The federal law governing civil in rem forfeiture actions gives the government authority to seize items it suspects were used in furtherance of criminal activity and to commence civil in rem proceedings against the property without charging the property's owner with a crime. See United States v. Seventeen Thousand Nine Hundred Dollars ($17,900.00) in U.S. Currency, 859 F.3d 1085, 1087 (D.C. Cir. 2017) explaining the practice of civil forfeiture); see also Leonard v. Texas, 137 S. Ct. 847, 848-49, 197 L. Ed. 2d 474 (2017) (Thomas, J.) (statement respecting the denial of certiorari) (describing some abuses in the administration of civil forfeiture laws in the United States and questioning the constitutionality of such laws). Federal agents and entities have significant latitude to pursue these claims, from special discovery provisions written into the governing rules to a burden of proof that is lower than required in standard criminal cases. But this latitude has its limits, and this case requires us to define some of these limits. The district court granted the government's motion to strike Taiwan Wiggins's and Dalante Allison's claims to currency seized from each man at the Cleveland Hopkins International Airport. Each man's claim asserted that he owned the currency that had been taken from his suitcase. The district court recited the facts as alleged by the government, found that each claim presented "nothing more than a naked assertion of ownership," and held that, under Sixth Circuit precedent, Wiggins and Allison lacked the standing necessary to pursue their claims. 

In many ways, this civil forfeiture action looks routine, for federal courts have developed well-settled principles concerning a forfeiture claimant's need to demonstrate both Article III and statutory standing. But this case comes to us in a procedural posture unlike most civil forfeiture actions—the government apparently moved to dismiss the claim before it engaged in any discovery. Its basic argument before the district court and on appeal is that the claimant's pleadings must do more than assert a bare ownership in the res that is subject to forfeiture, and that the claimant's pleadings must provide the government sufficient detail to draft interrogatories allowing it to test the claimant's claim of ownership. As we will explain, the procedural rules governing civil forfeiture actions do not demand such a heightened standard. Accordingly, we REVERSE the district court's order granting the government's motion to strike the claim and REMAND for further proceedings.

The factual background is that DEA agents questioned two persons seeking to depart from an airport and gained access -- allegedly consensual access -- to their baggage.  The DEA agents discovered cash in their baggage of $31,000 and $10,000 respectively.  A DEA canine alerted the agents to odor of narcotics.  Upon questioning, each of the individuals claimed employment with a cleaning service company and one individual could name only one customer of the company.  The DEA agents could not locate any of these companies or the customer.  The Government then moved to forfeit the cash under "21 U.S.C. § 881(a)(6), as proceeds traceable to drug trafficking activities or that were used or intended to be used to facilitate drug-trafficking in violation of 21 U.S.C. §§ 841(a), 846."  Each of the individuals filed claims for their respective cash the Government sought to forfeit.  The claims appeared to be slim on details but did make critical assertions that the claimants owned the respective funds and that the funds had been illegally seized.

The Court said that, "]b]ecause this case presents an issue of first impression in this circuit, we discuss the applicable procedural rules and case law in some detail."  The Court discusses the rules governing in rem forfeiture actions -- 18 U.S.C. § 983, here, and Rule G of the Federal Rules of Civil Procedure's Supplemental Rules for Admiralty or Maritime Claims and Civil Forfeiture Actions (the "Supplemental Rules"), here.  The Court then discussed those rules as follows:

Rule G(2) requires, among other things, that the government file a verified complaint that "describe[s] the property with reasonable particularity," "identif[ies] the statute under which the forfeiture action is brought," and "state[s] sufficiently detailed facts to support a reasonable belief that the government will be able to meet its burden of proof at trial." Rule G(2)(a)—(f). 

Rule G(5) outlines how a claimant may become a part of the case and requires a would-be claimant to file two pleadings. Rule G(5)(a) states that anyone "who asserts an interest in the defendant property may contest the forfeiture by filing a claim in the court where the action is pending." Rule G(5)(a)(i). The claim must "identify the specific property claimed," "identify the claimant and state the claimant's interest in the property," "be signed by the claimant under penalty of perjury," and be served on the government in the specified way. Rule G(5)(a)(i)(A)—(D). "The verification requirement of Supplemental Rule G is particularly important because it helps 'prevent the danger of false claims in forfeiture proceedings by informing the court on oath or affirmation that the claimant is entitled to contest the forfeiture action by virtue of his interest in the defendant property.'" United States v. One Men's Rolex Pearl Master Watch, 357 F. App'x 624, 627 (6th Cir. 2009) (quoting United States v. Currency $267,961.07, 916 F.2d 1104, 1108 (6th Cir. 1990)). 

Additional provisions in Rule G(5) set the timelines for filing a claim and provide a specific pleading rule for those asserting an interest in the property as a bailee. Rule G(5)(a)(ii)—(iii). Rule G(5)(b) gives the claimant twenty-one days to file an answer or a motion under Rule 12 of the Federal Rules of Civil Procedure. 

Once a party has filed a claim, Rule G(6) gives the government authority to "serve special interrogatories . . . at any time after the claim is filed and before discovery is closed." Rule G(6)(a); see United States v. $133,420.00 in U.S. Currency, 672 F.3d 629, 635 (9th Cir. 2012) (describing this limited discovery power as one that is "unlike" what usually occurs "in typical civil proceedings"). These special interrogatories are "limited to the claimant's identity and relationship to the defendant property." Rule G(6)(a); see also $133,420.00 in U.S. Currency, 672 F.3d at 635 ("The purpose of the rule is 'to permit the government to file limited interrogatories at any time after the claim is filed to gather information that bears on the claimant's standing."' (quoting Supplemental Rule G advisory committee's note (subdiv. (6)))). The claimant must answer or object to the special interrogatories within twenty-one days of service. Rule G(6)(b). 

Rule G(8) creates four motions and one petition applicable in in rem forfeiture actions. Rule G(8)(a) allows a party "with standing to contest the lawfulness of the seizure" of the defendant property to "move to suppress use of the property as evidence." Rule G(8)(b) allows "[a] claimant who establishes standing to contest forfeiture [to] move to dismiss the action under [Federal Rule of Civil Procedure] 12(b)." Rule G(8)(c) provides that "[a]t any time before trial, the government may move to strike a claim or answer" either (a) "for failure to comply with Rule G(5) or (6)," or (b) "because the claimant lacks standing." Rule G(8)(c)(i)(A)—(B). The Rule further provides that a motion to strike must be decided before a claimant's motion to dismiss, and "may be presented as a motion for judgment on the pleadings or as a motion to determine after a hearing or by summary judgment whether the claimant can carry the burden of establishing standing by a preponderance of the evidence." Rule G(8)(c)(ii)(A)—(B).

The Court then discussed the requirement for standing to challenge a forfeiture action.  The Court noted that there is a constitutional standing requirement and a statutory one.  The constitutional and statutory standing requirements are that the party bringing the claim must assert an interest in the property sought to be forfeited.  The Court said that the general claim of ownership met the Article III standing requirement.  There was no requirement at this stage that the claimant give details of its claim:

At the pleading stage, a verified claim of ownership is sufficient to satisfy Article III and the procedural requirements of Rule G. See id.; see also United States v. Funds in the Amount of $239,400, 795 F.3d 639, 643 (7th Cir. 2015) ("[S]atisfying procedural requirements—not demonstrating 'legitimate' ownership—is all that Rule G asks of claimants aside from showing constitutional standing."). Here, where the government alleged that it took a bundle of cash from a claimant's suitcase, and each claimant stated that he owned the cash, there is a clear allegation of ownership that satisfies Article III. And the claimant's making of such a statement is what satisfies Rule G's statutory standing requirement. Therefore, at least at this stage in the litigation, there was no basis on which the district court could strike the claim.

The Court rejects the Government's arguments for more detailed initial factual allegations based on (i) the "sirens' song about the value of high pleading standards and the benefits it will receive from forcing claimants to support their claims from the outset of a forfeiture proceeding" and (ii) the Government's policy argument to impose more detailed pleading requirements and concluded as follows:

For the foregoing reasons, we find that the district court erred by dismissing Wiggins's and Allison's claims due to a lack of standing. We hold that strict compliance with Rule G does not require a claimant to state the additional facts that the government requests, where, as here, the claimants make a verified claim of ownership and not mere possession. Because Wiggins and Allison have Article III standing and have satisfied the requirements of Rule G, we return this case to the district court for further proceedings. We express no opinion on any other aspect of this case. Accordingly, we REVERSE the district court's order granting the government's motion to strike and REMAND the case for further proceedings.