United States. Congress. House. Committee on the J.

Civil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 online

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Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 6 of 37)
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Lots 50 Sc 51 . 681 F. Supp. 309, 313 (E.D.N.C. 1988) . The amend-
ment is therefore intended merely to remove any ambiguity result-
ing from Congress's previous omission in conforming Rule E and
the other amended provisions to § 1355(d) as they apply to
forfeiture cases.

Section 103 Judicial Review of Administrative Forfeitures

Administrative forfeitures are generally not subject to
judicial review. See 19 U.S.C. § 1609(b) ("a declaration of
forfeiture under this section shall have the same force and
effect as a final decree and order of forfeiture in a judicial
forfeiture proceeding in a district court"). Thus, if a claimant
fails to file a claim opposing an administrative forfeiture



49



action, he may not subsequently ask a court to review the decla-
ration of forfeiture on the merits. Linarez v. Department of
Justice . 2 F.3d 208, 213 (7th Cir. 1993) ("A forfeiture cannot be
challenged in district court under any legal theory if the claims
could have been raised in an administrative proceeding, but were
not . " ) .

Fundamental fairness, however, requires that a claimant have
the opportunity to attack an administrative forfeiture on the
ground that the he did not file a timely claim because the
government failed to provide him with notice of the administra-
tive action. In such cases, it is appropriate for a court to
determine if the government complied with the statutory notice
provisions set forth in § 1607, and if not, to allow the claimant
to file a claim in accordance with § 1608 notwithstanding the
expiration of the claims period. See United States v. Woodall .
12 F.3d 791, 793 {8th Cir. 1993).

Under current law, however, it is unclear what statute gives
the district courts jurisdiction to review due process challenges
to administrative forfeiture; indeed, plaintiffs have attempted
to base claims on a variety of provisions including the Tucker
Act, 28 U.S.C. § 1346(a)(2); the Federal Tort Claims Act, 28
U.S.C. § 1346(b); the Administrative Procedures Act, 5 U.S.C.
§ 702; Rule 41(e) of the Federal Rules of Criminal Procedure; 28
U.S.C. § 13 56; and the Fourth and Fifth Amendments to the

Constitution. See Wright v. United States . F. Supp. ,

1995 WL 649560 (S.D.N.Y. Nov. 3, 1995). This has led to
widespread confusion as different proc e d urGS are applied in
different cases, including different statutes of limitations
depending on the statute employed. See Williams v. PEA . 51 F.3d
732 (7th Cir. 1995) (applying two-year statute of limitations but
noting that the contours of the exercise of the court's equitable
jurisdiction are "largely undefined"); Demma v. United States .
1995 WL 642831 (N.D. 111. Oct. 31, 1995) (applying six-year
statute of limitations to Tucker Act theory) .

This amendment establishes a uniform procedure for
litigating due process issues in accordance with the leading
cases. See Toure v. United States . 24 F.3d 444 (2d Cir. 1994);
Woodall . supra . Under this procedure, which is intended to be
the exclusive procedure for challenging administrative forfeiture
declarations, a claimant who establishes that the government
failed to comply with the statutory notice requirements would be
entitled to have the administrative forfeiture set aside so that
he may file a claim and cost bond and force the government to
initiate a judicial forfeiture action. If the property itself
has already been disposed of, the claim would be made against a
sum of money of equivalent value. See Republic National Bank v .
United States . 113 S. Ct . 554 (1992). To invoke the jurisdiction
of the district court under this provision, an action to set
aside a declaration of forfeiture would have to be filed within



50



two years of the last date of publication of notice of the
forfeiture of the property.

As the appellate courts have held, the review of an
administrative forfeiture under this section is limited to

whether notice was adequate. Toure, 24 F.3d at . The

claimant would not be entitled to use this section to seek review
of the administrative forfeiture decree on the merits; nor could
the claimant seek relief under this section if, notwithstanding
the defect in the government's compliance with the notice
provision, the claimant had actual notice of the seizure from
some other source, or was actually present when the property was
seized and knew that it would be forfeited. See United States v.
Giovanelli . 807 F. Supp. 351 (S.D.N.Y. 1992) (claimant who had
actual knowledge of the forfeiture cannot sit on his claim and
then argue that the government's efforts to provide notice were
inadequate), rev ' d 998 F.2d 116 (2d Cir. 1993); United States v.
One 1987 Jeep Wrangler . 972 F.2d 472 (2d Cir. 1992) (lack of
publication did not amount to violation of due process where
claimant had actual knowledge of the seizure) ; Lopes v. United
States . 862 F. Supp. 1178, 1188 (S.D.N.Y. 1994) (where there is
actual notice of an impending forfeiture, there is no violation
of due process) ; U-Series International Service v. United States .
1995 WL 649932 (S.D.N.Y. Nov. 6, 1995) (same).

The limitations in this section are applicable only to
actions to set aside forfeiture decrees, and do not apply to
actions against agencies for damages relating to the loss or
destruction of seized property. . — -

Section 104 Judicial Forfeiture of Real Property

This amendment makes all real property "not subject to
section 1607," see 19 U.S.C. § 1610, and thereby requires its
judicial forfeiture rather than permitting the forfeiture to
proceed administratively. The amendment provides added assurance
that the requirements of due process that attend forfeitures of
residences and business real estate will be observed.

Section 105 Preservation of Arrested Real Property

Rule E(4) (b) of the Supplemental Rules for Certain Admiralty
and Maritime Claims governs the service of arrest warrants in rem
in most civil forfeiture cases. The Rule provides that certain
tangible property, including real property, may be arrested
without seizing the property and displacing the owners or occu-
pants. Commonly in such cases, the marshal or other person
executing the warrant posts the warrant in a conspicuous place
and leaves a copy of the forfeiture complaint with the person in
possession or his agent. The government may also file a lis
pendens to apprise all interested persons of the pendency of the
forfeiture action. See United States v. James Daniel Good Real



51



Property . 114 S. Ct . 492 (1993); United States v. Twp. 17 R 4 .
970 F.2d 984 (1st Cir. 1992) .

This procedure is preferable in many cases to the actual
seizure of the property because it permits the owners or occu-
pants of the property to remain in possession of the property
during the pendency of the forfeiture action. Government agents
are sometimes reluctant to follow this procedure, however,
because of legitimate concerns about the destruction or removal
of the property or its contents by the persons in possession.
The amendment is intended to address these concerns and thereby
to encourage the use of the least intrusive means of arresting
property by explicitly authorizing and directing the courts to
issue any order necessary to prevent such diminution in the value
of the property, including the value of the contents of the
premises and any income, such as rents, generated by the
property.

Section 106 Amendment to Federal Tort Claims Act Exceptions

The Federal Tort Claims Act currently bars claims arising
from the detention of "goods and merchandise" by law enforcement
officers in certain circumstances. See 28 U.S.C. § 2680(c). In
Kurinslcv v. United States , 33 F.3d 594 (6th Cir. 1994), the court
limited this provision to cases involving the enforcement of the
customs and excise laws, thus exposing law enforcement agencies
to liability when property is detained in other circumstances.
This is of particular concern to the United States Marshals
Service which is responsible for the datantion of property in a
variety of circumstances not connected to the customs and excise
laws .

The amendment corrects the problem identified in Kurinskv by
expanding § 2680(c) to cover any property detained by any law
enforcement officer performing any official law enforcement
function. In addition, however, this section exempts from the
§ 2680(c) exception (and thereby allows) those tort claims that
are based on damages to property while the property is in law
enforcement custody for the purpose of forfeiture.

This proposal addresses a legitimate concern that the law
provide a remedy for citizens whose property is seized and is
damaged or lost while it is in the possession of a government
agency. This concern only applies, however, if the property is
seized for the purpose of forfeiture but is not ultimately found
to be subject to forfeiture. A pending forfeiture proceeding
against seized property has the potential to make the related
property damage claim moot. Therefore, the proposal makes clear
that the claims would be permitted only if no forfeiture action
is filed, or after forfeiture litigation is complete. The
amendment also makes clear that this provision is limited to
instances where property was seized for the purpose of



52



forfeiture. It does not apply in the types of routine customs
cases that are exempted from the Tort Claims Act under current
law.

Section 107 Pre -Judgment Interest

This amendment clarifies the law regarding the government's
liability for pre-judgment interest in a forfeiture case that
results in the entry of judgment for the claimant. Because the
United States has not waived sovereign immunity, it is generally
not liable for pre-judgment interest in forfeiture cases. See
L ibrary of Congress v. Shaw . 478 U.S. 310, 311 (1986) (the
government is not liable for interest on seized currency "in the
absence of an express waiver of sovereign immunity from the award
of interest"). Some courts have held, however, that sovereign
immunity is not implicated when a court orders the government to
disgorge benefits actually received as a result of the seizure of
the claimant's property. See United States v. $277.000 U.S.

Currency. F.3d , 1995 WL 675831 (9th Cir. Nov. 15, 1995);

County of Oakland v. VISTA Disposal. Inc. . F. Supp. (E.D,

Mich. Sept. 26, 1995) .

The amendment adopts the reasoning of these courts and
provides that notwithstanding the absence of a waiver of
sovereign immunity, the United States will disgorge any money
actually received as a result of investing seized property in an
interest-bearing account or monetary instrument. The amendment
makes clear, however, that the government is liable only for
funds actually received; it is not liahlp -for the interest that
could have been realized had the seized funds been invested at a
higher rate or for a longer period of time. Nor is the
government required to disgorge any intangible benefits. In
particular, one court suggested that the government had to
disgorge an amount of money equal to any savings the government
enjoyed by virtue of not having to borrow money to finance the
national debt as long as it held the seized property. $277, OOP .
supra . Under the amendment, liability for such intangible
benefits is precluded.

Subtitle B - Civil Forfeiture Investigations

Section 121 Trial Procedure for Civil Forfeiture

This section enacts a comprehensive set of procedures
governing civil forfeiture cases under most federal statutes to
be codified at 18 U.S.C. § 987. Modeled to a large extent on
model civil forfeiture statute produced by the President's
Commission on Model State Drug Laws, see Commission Forfeiture
Reform Act ("CFRA"), it replaces the references to the customs
laws that presently govern judicial proceedings in civil
forfeiture cases. See 19 U.S.C. § 1615.



53



Subsection (a) provides that the Attorney General may file a
civil forfeiture action in a district court under any statute for
which civil forfeiture is authorized. In most cases, the filing
of the complaint will follow the initiation of an administrative
forfeiture under the customs laws, and the referral of the case
to the U.S. Attorney when someone files a claim and cost bond
pursuant to 19 U.S.C § 1608. This is the same procedure as
exists under current law, and would continue to be the normal
procedure .

The complaint would be filed in the manner set forth in
Rules C and E of the Federal Rules of Civil Procedure,
Supplemental Rules for Certain Admiralty and Maritime Claims.
See 28 U.S.C. § 2461(b). Because the provisions of the customs
laws will no longer apply to the judicial forfeiture proceedings,
the requirement that the Attorney General have probable cause for
the initiation of a forfeiture action would not apply. See
United States v. $191.910.00 in U.S. Currency . 16 F.3d 1051 (9th
Cir. 1994) . Instead, the Attorney General could file the
forfeiture action under the same criteria that apply to the
initiation of any other civil enforcement action under federal
law. The government would, of course, have to have probably
cause and in most cases a warrant before it could seize any
property. See seizure warrant provisions, infra .

Where Congress has authorized both criminal and civil
forfeiture for the same offense, the Attorney General would have
the discretion to determine whether to institute a civil
forfeiture action by filing a complaint, ui-a criminal action by
including a forfeiture count in an indictment, information or
criminal complaint. Where Congress has enacted a criminal
forfeiture statute and a criminal prosecution is pending, it is
usually more efficient to combine the forfeiture action with the
criminal prosecution. But the civil forfeiture laws permit the
government to bring forfeiture actions separate from and in
addition to criminal prosecutions where the Attorney General
determines that it is appropriate to do so. This is frequently
the case where the criminal defendant is a fugitive, where the
government's investigation regarding the forfeiture is not
complete at the time the criminal indictment is filed, or where
third party interests in the property must be adjudicated.
Moreover, where Congress has not enacted a criminal forfeiture
provision for a given offense, parallel civil and criminal cases
are unavoidable. Thus, the statute authorizes the Attorney
General to file a civil forfeiture action and a criminal
indictment with respect to the same offense.

Subsection (b) deals with situations in which a law
enforcement agency has previously seized property for forfeiture
but the forfeiture must be handled judicially instead of
administratively either because the claimant has filed a claim
and cost bond under the customs laws, see 19 U.S.C. § 1608, or



54



because the customs laws do not permit an administrative
forfeiture of the particular property, see 19 U.S.C. § 1607
(limiting administrative forfeitures generally to personal
property valued at less than $500,000). The statute provides
that in such cases, the Attorney General must determine whether
to file a forfeiture action as soon as practicable.

The statute avoids setting a definite time limit because
there will be cases where the premature filing of a forfeiture
action could adversely affect an ongoing criminal investigation.
In particular, it is appropriate for the Attorney General to take
into account the impact the filing of the civil case might have
on on-going undercover operations and the disclosure of evidence
being presented to a grand jury.

Subsection (c) provides for the filing of a claim and answer
by the claimant in the manner prescribed in Rule C of the
Admiralty Rules. In addition, the statute sets forth certain
requirements regarding the description of the claimant's
ownership interest in the property that must be included in the
claim. These are the same criteria currently required of a
claimant in a criminal forfeiture case. See 18 U.S.C.
§ 1963(1) (3); CFRA, § 16(d).

Subsection (d) provides that the claimant has the threshold
burden of establishing his or her standing to contest the
forfeiture action. The standing provision parallels the standing
provision for third parties challenging criminal forfeitures.
See 18 U.S.C. § 1963 (1) (2) ; United StaTgS" v. BCCI Holdings
(Luxembourg) S.A. . 833 F. Supp. 9 (D.D.C. 1993), aff'd 46 F.3d
1185 (D.C. Cir. 1995) . Under that rule, the claimant must
establish that he has an ownership interest in the property,
including a lien, mortgage, recorded security device or valid
assignment of an ownership interest. In other words, for stand-
ing purposes a claimant must establish the same ownership inter-
est he or she must establish to assert an innocent ownership
defense under the uniform innocent owner statute, 18 U.S.C.
§ 983 . General creditors of the property owner do not have
standing, see BCCI Holdings , supra , nor do nominees who exercise
no dominion and control over the property, see United States v.
One 1990 Chevrolet Corvette . 37 F.3d 421 (8th Cir. 1994) . To the
extent that some courts have found standing based on mere
possession, those cases are overruled by the new statute. See,
e.g. . United States v. $191.910.00 in U.S. Currency . 16 F.3d 1051

(9th Cir. 1994) (holding that it is sufficient for standing
purposes for claimant to assert that he is holding money for a

friend) .

The statutes also creates a mechanism for litigating
standing issues pre-trial. In the pre-trial standing hearing,
the government has the burden of challenging the claimant's
standing in the first instance, and the claimant has the ultimate



55



burden to establish standing once the issue has been raised. The
pre-trial hearing is intended only to resolve the standing
issues, and is not intended to be a mini-trial in which the
government's case- in-chief and the claimant's affirmative
defenses are litigated.

Subsection (e) follows the model state rule in placing the
burden on the government to prove by a preponderance of the
evidence that the property is subject to forfeiture, and in
placing the burden on the claimant, by the same standard, to
prove an affirmative defense. See CFRA, § 16(g) . This is a
major change from current law which places the burden of proof on
the claimant on both issues. See 19 U.S.C. § 1615.

Under current law, a law enforcement officer may seize
property based on probable cause to believe that the property is
subject to forfeiture. If, upon publication of the intent to
forfeit the property and the sending of notice to persons with an
interest therein, no one files a claim to the property, it may be
forfeited based on the same showing of probable cause that
supported the initial seizure.

If a claim is filed, the U.S. Attorney must file a complaint
in the district court. At a trial on the forfeiture issues, the
property is forfeited if the judge or jury finds, by a
preponderance of the evidence, that the property is subject to
forfeiture under the applicable statute. The burden of
establishing that the property is not subject to forfeiture is on
the person filing the claim. 19 U.S .C._§__1615 .

Many courts have criticized this latter aspect of forfeiture
procedure, and have insisted on a presentation of evidence by the
government at trial that effectively places the burden on the
government to establish the forf eitability of the property. See
United States v. $30.600 . 39 F.3d 1039 (9th Cir. 1994); United
States V. $31.990 in U.S. Currency . 982 F.2d 851 (2d Cir. 1993).
Accordingly, subsection (e) changes current law to provide that
the government, not the claimant, bears the burden of proof
regarding the forf eitability of the property, while the claimant
retains the burden of proof regarding any affirmative defenses.

See United States v. One Parcel . . . 194 Quaker Farms Road .

F.3d , 1996 WL 292036 (2d Cir. Jun. 4, 1996) (claimants

asserting affirmative innocent owner defenses have "unique access
to evidence regarding such claims,-" they know what facts were
brought to their attention and "why facts of which owners are
generally aware were unknown to them;" accordingly, placing the
burden of proof on the claimant regarding the affirmative defense
is appropriate) . While the allocation of the burden of proof
would change, the standard of proof - i.e., preponderance of the
evidence, would remain the same as it is under current law.



56



Moreover, the change in the burden of proof would apply only
to judicial forfeitures; it would have no effect on the seizure
of property based on probable cause, or the administrative or
civil forfeiture of the property based solely on the showing of
probable cause if no one files a timely claim to the property.

Subsection (e) also specifies that when the government's
theory of forfeiture is that the property facilitated the
commission of a criminal offense, see, e.g. 21 U.S.C.
§§ 881(a)(4) and (7), the government must establish that there
was a substantial connection between the property and the
offense. This codifies the majority rule as expressed in United
States V. One 1986 Ford Pickup . 56 F.3d 1181 (9th Cir. 1995);
United States v. 1966 Beechcraft Aircraft . 777 F.2d 947, 953 (4th
Cir. 1985) ; United States v. One 1976 Ford F-150 Pick-Up . 769
F.2d 525, 527 (8th Cir. 1985); United States v. 1972 Chevrolet
Corvette . 625 F.2d 1026, 1029 (1st Cir. 1980); and United States

V. 100 Chadwick Drive . F. Supp. , 1995 WL 786581 (W.D.N. C.

Nov. 20, 1995) . The Second, Fifth and Seventh Circuits currently
require a lesser degree of connection between the property and
the criminal activity underlying the forfeiture. See United
States V. Daccarett . 6 F.3d 37 (2d Cir. 1993) (gov't must
demonstrate only a "nexus," not a "substantial connection");
United States v. 1990 Toyota 4Runner . 9 F.3d 651, 653-54 (7th
Cir. 1993) ; United States v. 1964 Beechcraft Baron Aircraft . 691
F.2d 725, 727 (5th Cir. 1982) .

Subsection (f) requires claimants to set forth all
affirmative defenses in the initial pleadings. This is
consistent with Rule 8(c) and other provisions of the Fed. R.
Civ. P. which require a party to assert his or her affirmative
defenses in the initial pleadings and to submit to discovery on
those matters pre-trial. The balance of the subsection is
intended only to make clear that once trial has commenced, a
claimant will not be required to assume either the burden of
proof regarding an affirmative defense or the burden of
production of evidence until the government has establish a prima
facie case in its case-in-chief.

Subsection (g) establishes rules regarding motions to
suppress seized evidence. It recognizes that a claimant must be
afforded some remedy if the government's initial seizure of the
property was illegal for lack of probable cause and the claimant
has standing to object to the 4th Amendment violation. See
Rawlings v. Kentucky . 448 U.S. 98 (1980) . The statute codifies
the general rule that the remedy in such cases is the suppression
of the illegally seized evidence. In such cases, civil
forfeiture law is analogous to the criminal law which provides
for the suppression of illegally seized evidence while permitting
the government to go forward with its case based on other
admissible evidence. See United States v. $7,850.00 i n U.S.
Currency . 7 F.3d 1355 (8th Cir. 1993); United States v. A Parcel

10



57



of Land (92 Buena Vista) . 937 F.2d 98 {3rd Cir. 1991), aff'd on
separate issue 113 S. Ct . 1126 (1993); United States v. Premises
and Real Property at 4492 S. Livonia Rd. . 889 F.2d 1258, 1268 (2d
Cir. 1989) ; United States v. $67.220.00 in United States
Currency . 957 F.2d 280, 284 {6th Cir. 1992); United States v. 155
Bemis Road . 760 F. Supp. 245, 251 (D.N.H. 1991); United States v.
Certain Real Property Located on Hanson Brook . 770 F. Supp. 722,
730 (D. Me. 1991); United States v. $633.021.67 in U.S. Currency .
842 F. Supp. 528 {N.D. Ga . 1993) .

Outside of the context of a motion to suppress, the claimant
has no right to any preliminary hearing on the status of the
government's evidence, nor any right to move to dismiss a case
for lack of evidence pre-trial. Pre-trial dispositive motions
are limited to those based on defects in the pleadings, as set
forth in Rule 12 of the Federal Rules of Civil Procedure. A
claimant may, of course, move for the entry of summary judgment
pursuant to Rule 56, Fed. R. Civ. P., once discovery is complete.

Subsection (h) authorizes the use of hearsay at pre-trial
hearings. This is consistent with the present rule regarding



Online LibraryUnited States. Congress. House. Committee on the JCivil Asset Forfeiture Reform Act : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Fourth Congress, second session, on H.R. 1916 ... July 22, 1996 → online text (page 6 of 37)