936 F.3d 233
5th Cir.2019Background
- RRCC, a private Texas vocational school that trained many veterans using GI Bill benefits, had over $4.6 million seized in 2017 in an in rem federal civil forfeiture action alleging fraud and violations of VA rules.
- RRCC filed a verified claim to the seized funds and asserted two constitutional counterclaims seeking damages under the Fourth and Fifth Amendments for the seizure and alleged lack of notice/hearing, plus alleged business destruction.
- The government moved to dismiss the counterclaims; the district court, relying on the First Circuit’s rule in United States v. One Lot of U.S. Currency ($68,000), dismissed them as impermissible in an in rem forfeiture proceeding.
- The district court entered a Rule 54(b) judgment dismissing RRCC’s counterclaims; RRCC appealed that dismissal.
- The Fifth Circuit declined to decide the broader question whether counterclaims are categorically barred in in rem forfeiture cases, and instead held RRCC’s specific constitutional-damages counterclaims were barred by the United States’ sovereign immunity.
- The Fifth Circuit vacated the district court’s judgment and remanded with instructions to dismiss RRCC’s counterclaims for lack of subject matter jurisdiction (dismissal without prejudice).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claimants in an in rem civil forfeiture may bring counterclaims | RRCC: counterclaims permissible; initiation of in rem action does not bar counterclaims | Gov: claimants are not defendants; in rem nature means no counterclaims (citing $68,000) | Court: did not decide the categorical rule; left open for another day |
| Whether the U.S. waived sovereign immunity for RRCC’s Fourth Amendment damages claim | RRCC: statutory waivers (e.g., FTCA §2680(c) or waiver by bringing in rem suit) permit damages | Gov: no waiver for constitutional torts; sovereign immunity bars such claims | Held: sovereign immunity bars Fourth Amendment damages claim; no waiver applies |
| Whether FTCA §2680(c)/CAFRA re-waives immunity for these claims | RRCC: §2680(c) provides a waiver for forfeiture-related property claims | Gov: §2680(c) does not waive immunity for constitutional torts; FTCA only covers state-law torts | Held: FTCA waiver does not cover constitutional-damages counterclaims; FTCA cannot predicate constitutional torts |
| Whether admiralty cross-libel principles or other doctrines waive immunity in rem | RRCC: analogies to admiralty cross-libel cases (The Thekla, Paquete Habana) imply waiver when U.S. sues in rem | Gov: admiralty rule is distinct and limited; no general waiver in civil forfeiture | Held: admiralty cross-libel doctrine does not waive sovereign immunity in forfeiture; no statutory waiver shown |
Key Cases Cited
- United States v. Mitchell, 463 U.S. 206 (sovereign immunity requires consent to sue)
- FDIC v. Meyer, 510 U.S. 471 (constitutional torts are not cognizable under FTCA)
- United States v. One Lot of U.S. Currency ($68,000), 927 F.2d 30 (1st Cir.; in rem forfeiture reasoning on counterclaims)
- Spotts v. United States, 613 F.3d 559 (5th Cir.; FTCA requires state-law predicate, constitutional torts excluded)
- Warnock v. Pecos County, Tex., 88 F.3d 341 (5th Cir.; sovereign-immunity dismissals are jurisdictional and without prejudice)
- Zappone v. United States, 870 F.3d 551 (6th Cir.; followed the $68,000 approach on counterclaims)