Smoke Shop, LLC v. United States
761 F.3d 779
7th Cir.2014Background
- In 2012 DEA agents seized ~8,000 packages of “incense products” from The Smoke Shop (Delavan, WI); later testing showed the products contained synthetic cannabinoids XLR-11 and UR-144.
- Smoke Shop’s owner consented to the seizure after being told items would be tested and non-illegal items returned; DEA later said some tested positive and would not be returned.
- Smoke Shop filed a Rule 41(g) motion for return of property; while that proceeding was pending the Attorney General temporarily scheduled XLR-11 and UR-144 as Schedule I substances.
- The district court dismissed the Rule 41(g) motion and invited Smoke Shop to sue for damages under the Federal Tort Claims Act (FTCA).
- Smoke Shop then brought an FTCA conversion suit seeking ~$110,000; the district court dismissed under Rule 12(b)(6), holding (1) the FTCA’s detained-goods exception (28 U.S.C. § 2680(c)) barred the claim because CAFRA’s re-waiver did not apply, and (2) Smoke Shop failed to exhaust administrative remedies under 28 U.S.C. § 2675(a).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CAFRA’s re-waiver (28 U.S.C. § 2680(c)) applies because the property was "seized for the purpose of forfeiture" | Smoke Shop: DEA seized property to forfeit it (sole purpose); summary forfeiture for controlled substances under § 881 makes forfeiture the seizure purpose | U.S.: Seizure was part of a criminal investigation (not solely for forfeiture); CAFRA re-waiver inapplicable | Court held Foster’s sole‑purpose test governs: seizure was for criminal investigation, so CAFRA’s re‑waiver does not apply and the detained‑goods exception bars the FTCA suit |
| Whether Smoke Shop’s Rule 41(g) motion satisfied the FTCA’s administrative‑claim requirement under 28 U.S.C. § 2675(a) | Smoke Shop: Rule 41(g) motion gave agencies constructive notice; no harm, no foul — agency had opportunity to resolve dispute | U.S.: Rule 41(g) did not present a claim for money damages in a sum certain; agencies lacked a damages claim to settle | Court held Rule 41(g) did not present a proper FTCA claim (no sum‑certain money demand); exhaustion required, so FTCA suit barred |
| Whether the complaint plausibly alleged the factual predicate that forfeiture was the sole purpose of the seizure | Smoke Shop: allegations and agent’s statements support plausible sole‑forfeiture purpose | U.S.: Allegations point to a criminal investigation (consent seizure, testing, later grand jury subpoena) — an obvious alternative explanation | Court found plaintiff’s factual allegations insufficient under Iqbal/Twombly plausibility standard; sole‑purpose claim implausible |
| Whether failure to raise a constitutional due‑process claim was preserved | Smoke Shop: argued Fifth Amendment due process issue on appeal | U.S.: — | Court deemed due‑process argument waived because it was not presented below and was undeveloped on appeal |
Key Cases Cited
- Foster v. United States, 522 F.3d 1071 (9th Cir. 2008) (adopted sole‑purpose test for CAFRA re‑waiver)
- On‑Site Screening, Inc. v. United States, 687 F.3d 896 (7th Cir. 2012) (seizure for criminal investigation, not forfeiture, excluded CAFRA re‑waiver)
- McNeil v. United States, 508 U.S. 106 (1993) (administrative claim must be presented before FTCA suit)
- Kanar v. United States, 118 F.3d 527 (7th Cir. 1997) (FTCA exhaustion is a condition precedent; regulations construed to require notice plus sum‑certain damages)
- Best Bearings Co. v. United States, 463 F.2d 1177 (7th Cir. 1972) (request for return of seized property does not satisfy § 2675(a) presentment requirement)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard governs sufficiency of factual allegations)