United States v. Thirty-Two Thousand Eight Hundred Twenty Dollars & Fifty-Six Cents ($32,820.56) in United States Currency, 838 F.3d 930

Background

In May 2013 the IRS seized $32,820.56 from Carole Hinders’s restaurant bank account, alleging she "structured" deposits to avoid currency-reporting requirements.
Agent review showed frequent deposits between $5,000–$9,500 and no single deposit over $10,000; Hinders admitted she kept deposits below $10,000 based on advice from her mother but disputed knowledge that banks must report such deposits to the IRS.
The government filed a civil forfeiture complaint in October 2013; Hinders filed claims and limited discovery proceeded.
In October 2014 the IRS issued a policy broadly declining most forfeitures in structuring cases involving legally sourced funds; in December 2014 the government moved to dismiss the forfeiture complaint without prejudice based on prosecutorial discretion.
The district court granted dismissal without prejudice, retained limited jurisdiction to consider CAFRA fee claims, denied Hinders’s CAFRA fee request (finding she had not "substantially prevailed"), refused to convert the dismissal to one with prejudice, but awarded limited costs.
Hinders appealed; the Eighth Circuit affirmed, holding dismissal without prejudice did not materially alter the parties’ legal relationship and thus did not trigger CAFRA fee-shifting.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Hinders “substantially prevailed” under CAFRA (28 U.S.C. § 2465(b)(1)) and is entitled to attorney fees, costs, and interest	Hinders argued she substantially prevailed because the case was dismissed and the seized funds were returned — she obtained her desired result	Government argued dismissal without prejudice did not effect a judicially sanctioned, material change in the parties’ legal relationship and therefore CAFRA fees are not warranted	Court held Hinders did not substantially prevail: dismissal without prejudice lacks the required judicial imprimatur and does not materially alter legal relationship, so no CAFRA fees
Whether the district court abused discretion by dismissing without prejudice rather than with prejudice	Hinders argued dismissal without prejudice caused legal prejudice (including loss of ability to obtain CAFRA fees) and the government dismissed to avoid a fee award	Government argued dismissal was a valid exercise of prosecutorial discretion under Rule 41(a)(2) and dismissal without prejudice was appropriate given limited discovery and changed policy	Court held no abuse of discretion: government provided a legitimate prosecutorial-recourse reason, dismissal would not waste resources, and Hinders waived fee-prejudice argument by not timely raising it
Whether Buckhannon’s “material alteration” standard applies to CAFRA’s “substantially prevails” language	Hinders urged a broader, result-focused reading of “substantially prevails” allowing fees after voluntary dismissals that achieve the claimant's objectives	Government argued Buckhannon’s requirement of a judicially sanctioned change controls and courts uniformly treat the terms similarly	Court held Buckhannon’s standard governs CAFRA; “substantially” modifies degree of victory, not the need for a judicially sanctioned change
Whether district court should have reconsidered dismissal on motion to reconsider	Hinders sought reconsideration to obtain dismissal with prejudice to secure fees	Government maintained original motion and reasoning stood; district court found waiver of the fee-prejudice argument	Court held district court did not err in denying reconsideration, finding waiver and no basis to convert dismissal to prejudice

Key Cases Cited

Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598 (2001) (a party "prevails" only when there is a judicially sanctioned material alteration in the legal relationship of the parties)
Sierra Club v. City of Little Rock, 351 F.3d 840 (8th Cir. 2003) (treating "substantially prevailed" as functionally equivalent to "prevailing party")
Union of Needletrades, Indus., & Textile Emps. v. INS, 336 F.3d 200 (2d Cir. 2003) (discussing "substantially" as indicating degree of recovery required, not method)
Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) (fee awards principles applicable to prevailing defendants as well as plaintiffs)
Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978) (standards for awarding fees to prevailing defendants in civil rights litigation)