748 F.3d 86
2d Cir.2014Background
- In 1999 U.S. agents seized ~$6.8 million from a New York bank account in the name of Kesten Development Corp.; the U.S. later dismissed its forfeiture claim and returned some funds.
- Brazil pursued criminal charges against Kesten principals in São Paulo and obtained a judgment (2012) convicting defendants and ordering forfeiture of the Venus Account funds as proceeds of Brazilian crimes.
- Liquidators of Trade and Commerce Bank (Cayman), holding a BVI default judgment and a domesticated U.S. judgment against Kesten, claimed the same funds in an interpleader action filed by the United States in 2010.
- The district court granted summary judgment to Brazil, ordering transfer of the funds to the São Paulo Court, finding the Brazilian criminal forfeiture binding and rejecting the penal law rule defense asserted by the Liquidators.
- The Second Circuit vacated that summary judgment, holding enforcement of a foreign criminal forfeiture implicates the common‑law "penal law rule," but recognized 28 U.S.C. § 2467 as a statutory exception and remanded so Brazil and the U.S. Attorney General could pursue § 2467 proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether U.S. courts may enforce a foreign criminal forfeiture judgment absent § 2467 action | Brazil: its criminal forfeiture is entitled to enforcement; funds derive from crime | Liquidators: penal law rule bars enforcement of another sovereign's criminal laws | Penal law rule bars enforcement absent a § 2467 petition; vacated summary judgment |
| Whether the Brazilian forfeiture is civil in rem (thus not penal) | Brazil: forfeiture is akin to an in rem civil award, not subject to penal law rule | Liquidators: judgment enforces penal law because it punishes public wrongs and condemns property as criminal proceeds | Substance controls over form; the judgment enforces penal law and is subject to penal law rule |
| Whether U.S. initiation of interpleader waives need for § 2467 procedure | Brazil: interpleader indicates U.S. recognition and suffices to resolve claim | Liquidators: interpleader does not substitute for statutory § 2467 process | Interpleader does not replace § 2467; courts cannot bypass statutory exception procedure |
| Whether § 2467 displaces the penal law rule | Liquidators: statute shouldn’t be read to abrogate common law broadly | Brazil: § 2467 authorizes enforcement when its conditions are met | § 2467 is a statutory exception; Attorney General discretion and treaty/criteria limit enforcement; remand to allow § 2467 process |
Key Cases Cited
- The Antelope, 23 U.S. (10 Wheat.) 66 (establishing that courts of one country do not execute penal laws of another)
- Hilton v. Guyot, 159 U.S. 113 (describing international comity and recognition of foreign acts)
- Wisconsin v. Pelican Ins. Co., 127 U.S. 265 (penal law rule applies to pecuniary penalties and forfeitures)
- Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (reiterating refusal to enforce foreign penal or revenue laws)
- United States v. Ursery, 518 U.S. 267 (forfeiture as penal in rem for constitutional double jeopardy analysis; did not address penal law rule enforcement by foreign sovereigns)
- Attorney Gen. of Can. v. R.J. Reynolds Tobacco Holdings, Inc., 268 F.3d 103 (2d Cir.) (discussing revenue/penal rules and limits on indirect enforcement)