123 F. Supp. 3d 108
D.D.C.2015Background
- Nancy Preston pled guilty to mail fraud; court entered a Final Order forfeiting a $239,069 money judgment to the United States, later amended to include substitute property (cash in James Preston’s Merrill Lynch account and certain securities in a Trust) under 21 U.S.C. § 853(p).
- On July 29, 2014, James W. Preston filed a § 853(n) petition asserting an interest in the substituted cash (two transfers totalling $11,500 on Jan. 20, 2012) and related securities, claiming he received them only to pay Nancy’s debts and that he paid equivalent value by liquidating his own securities.
- The Government moved to dismiss Preston’s petition as to the cash, arguing the petition failed to meet § 853(n)(3)’s pleading requirements and failed to state a claim under § 853(n)(6).
- The district court construed the petition as alleging alternative claims under § 853(n)(6)(A) (superior/right vested prior to offense) and § 853(n)(6)(B) (bona fide purchaser for value) and treated factual allegations in the petition as true for the motion-to-dismiss stage.
- The court held the petition satisfied the § 853(n)(3) pleading content requirements (nature/extent, time/circumstances) but failed to state a claim under § 853(n)(6): (A) Preston had no interest in the cash at the time of the acts giving rise to forfeiture; (B) the petition did not plausibly allege bona fide purchaser status or that he was reasonably without cause to believe the cash was subject to forfeiture.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether petition meets § 853(n)(3) pleading requirements | Preston: identifies transfers, dates, reason (Merrill Lynch closure) and alleges he paid equivalent value to Mrs. Preston | Government: petition lacks detail on time/circumstances (how/when Merrill Lynch closed account) and is conclusory | Court: § 853(n)(3) satisfied — allegations and exhibits sufficiently state nature, extent, time and circumstances |
| Whether Preston states a claim under § 853(n)(6)(A) (superior interest at time of offense) | Preston: claims superior right/title because he paid full consideration and received transfers | Government: Preston did not hold any interest at the time of the acts giving rise to forfeiture; transfers occurred after the offenses | Court: Dismissed as to (6)(A) — Preston acquired interest after the conduct that produced forfeitable property, so (6)(A) fails |
| Whether Preston states a claim under § 853(n)(6)(B) (bona fide purchaser for value) | Preston: claims he is a bona fide purchaser because he paid Mrs. Preston’s debts (equivalent value) and was unaware paying would cause liability | Government: statute requires being without cause to believe property was subject to forfeiture, not merely lack of personal liability knowledge; facts suggest awareness of Mrs. Preston’s criminality | Court: Dismissed as to (6)(B) — petition implausibly alleges bona fide purchaser reasonably without cause to believe cash was forfeitable |
| Procedural standard for § 853(n) ancillary petitions | Preston: relied on petition allegations and exhibits; argued claim falls under § 853(n)(6)(A) (and alternatively (B)) | Government: moved to dismiss under Rule 32.2 for failure to plead and failure to state a claim; asked court to consider extraneous evidence | Court: Applied Rule 12(b)-style review, assumed petition facts true and denied consideration of Government evidence at this stage; granted dismissal for failure to state a § 853(n)(6) claim |
Key Cases Cited
- United States v. Emor, 785 F.3d 671 (D.C. Cir. 2015) (§ 853(n) ancillary proceeding is the exclusive forum and requires Article III and statutory standing)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014) (statutory standing analyzes whether statute confers a cause of action for the plaintiff’s claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard governs motions to dismiss)
- Willis Mgmt. (Vt.), Ltd. v. United States, 652 F.3d 236 (2d Cir. 2011) (ancillary § 853(n) dismissal treated like a civil Rule 12(b) motion)
- United States v. Jimerson, 5 F.3d 1453 (11th Cir. 1993) (§ 853 contains no innocent owner defense; bona fide purchaser standard requires reasonable lack of cause to know property was forfeitable)
- United States v. Lavin, 942 F.2d 177 (3d Cir. 1991) (§ 853(n) not intended as vehicle for all aggrieved third parties; claimant must meet § 853(n)(6) criteria)