United States v. Oregon
2012 U.S. App. LEXIS 3048
| 4th Cir. | 2012Background
- MSA in 1998 prompted escrow statutes to offset non-participating manufacturers and fund future tobacco-liability claims.
- C.L.P., a non-participating manufacturer, created an escrow with sub-accounts for states including Oregon and Wisconsin; escrow held funds on behalf of states.
- Escrow agreement governed by North Carolina law; funds released only upon judgments/settlements or long-term reversion provisions; 25-year reversion default.
- District court entered a preliminary order of forfeiture and seized substitute assets from the escrow account when C.L.P. pled guilty to related offenses.
- Oregon and Wisconsin filed § 853(n) ancillary petitions asserting a legal interest; the district court amended the order to protect their sub-accounts.
- Fourth Circuit vacated the district court’s order and remanded for proceedings consistent with its opinion, after determining the States failed to prove vested or superior interests.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Oregon and Wisconsin have standing to seek amendment under §853(n) | Oregon/Wisconsin are obligees with a legal interest in the escrow funds | States lack a cognizable legal interest enforceable under §853(n) | Yes; States have standing |
| Whether States proved their interest was vested or superior in 2007–2008 | Interest was vested or superior to CLP’s | Interest was neither vested nor superior | No; States failed to prove vested or superior interest |
| Whether the district court properly amended the forfeiture order to protect the States’ interest | Amendment permissible if States had vested/superior interest | Amendment not warranted given lacking established interest | Vacated and remanded for appropriate proceedings |
Key Cases Cited
- McHan v. United States, 345 F.3d 262 (4th Cir. 2003) (§ 853(n) proceedings are a formal quiet-title-like inquiry to assess third-party interests)
- United States v. Morgan, 224 F.3d 339 (4th Cir. 2000) (considerations of ownership priority in ancillary forfeiture actions)
- United States v. Cone, 627 F.3d 1356 (11th Cir. 2010) (describes § 853(n) ancillary proceeding as quiet-title-like)
- Kennedy v. United States, 201 F.3d 1324 (11th Cir. 2000) (federal-law standard for determining superior/vested interest in § 853(n))
- Libretti v. United States, 516 U.S. 29 (1995) (reaffirming § 853(n) as the sole avenue for third-party rights in forfeiture)
- In re Bryson, 406 F.3d 284 (4th Cir. 2005) (discusses manipulation of state-law rights to shield assets; relevance to standards in § 853(n))
- United States v. Wilson, 659 F.3d 947 (9th Cir. 2011) (discusses vesting or superiority standards under § 853(n))