654 F. App'x 520
2d Cir.2016Background
- ADP Federal Credit Union held a judgment lien against ~123,000 preferred shares of Metropolitan Bank Holding Corp. that were in defendant Robert Egan’s possession.
- The Government moved under 21 U.S.C. § 853(p) to forfeit those shares as substitute assets; the district court entered a preliminary order of forfeiture before any ancillary proceeding.
- ADP filed its judgment lien after the district court entered the preliminary forfeiture order but before the final forfeiture order following the ancillary proceeding under § 853(n).
- In the ancillary proceeding, ADP argued its subsequently filed judgment lien had priority over the Government because the Government’s interest did not vest until the final order of forfeiture.
- The district court rejected ADP’s claims (including that it was a bona fide purchaser), concluding the Government’s interest vested upon entry of the forfeiture order and ADP could not meet § 853(n) criteria; the Second Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When does the Government’s interest in substitute property vest? | Government’s interest vests only on entry of a final forfeiture order after the ancillary proceeding. | Forfeiture order (even a preliminary order under Rule 32.2(b)) effects forfeiture; Government’s interest vests upon entry of that order. | Vests upon entry of the forfeiture order (preliminary order suffices). |
| Does premature entry (before Local Rule 49.1 deadline) of the preliminary order deprive ADP of procedural rights? | ADP: preliminary order entered four days after motion, before the local 14-day response period, so its later lien should have priority. | Gov/District: ADP had no right to participate pre-ancillary under § 853(k); no prejudice from early entry. | No reversible error; ADP had no right to respond before ancillary proceeding. |
| Does ADP’s judgment lien qualify as an interest under § 853(n)(6)(A)? | ADP: its judgment lien gave it priority over the forfeiture. | Court: lien filed after forfeiture order, so it post-dated Government’s vested interest and fails § 853(n)(6)(A). | ADP’s lien did not satisfy § 853(n)(6)(A). |
| Can ADP be treated as a "bona fide purchaser" under § 853(n)(6)(B)? | ADP: its judgment should qualify as a bona fide purchaser for value. | Court: judgment creditors are not purchasers for value; purchase did not involve these Shares; Shares were already forfeited, so ADP could not be reasonably without cause to believe they were subject to forfeiture. | ADP fails to meet § 853(n)(6)(B); not a bona fide purchaser. |
Key Cases Cited
- Hollingsworth v. Perry, 558 U.S. 183 (procedural/local rules have force of law)
- Weil v. Neary, 278 U.S. 160 (local rules binding)
- Contino v. United States, 535 F.3d 124 (2d Cir.) (local rules and procedure)
- Mathews v. Eldridge, 424 U.S. 319 (due process requires meaningful opportunity to be heard)
- United States v. Cone, 627 F.3d 1356 (11th Cir.) (third parties barred from pre-ancillary participation under § 853)
- United States v. Peterson, 820 F. Supp. 2d 576 (S.D.N.Y.) (discussing when government interest vests)
- United States v. BCCI Holdings, Lux., S.A., 69 F. Supp. 2d 36 (D.D.C.) (judgment lienholder is not a bona fide purchaser)