UNITED STATES of America, Appellee. v. FUNDS IN THE AMOUNT OF $239,400, Defendant, John R. Valdes and Tracey M. Brown, Claimants-Appellants.
No. 14-3451
United States Court of Appeals, Seventh Circuit
Argued May 22, 2015. Decided July 28, 2015.
795 F.3d 639
Edward Michael Burch, Attorney, James A. Bustamante, Attorney, David M. Michael, Attorney, Law Offices of David M. Michael, San Francisco, CA, for Defendant.
Before EASTERBROOK, WILLIAMS, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge.
This appeal requires us to enforce recent reforms in civil forfeiture law. The Civil Asset Forfeiture Reform Act of 2000 put the burden on thе government to prove by a preponderance of evidence that property is forfeitable.
I. Factual and Procedural Background
Claimant-appellant John Valdes was traveling from Boston to Los Angeles by train. During a layover in Chicago, DEA agents approached Valdes because he fit their profile of a drug courier: He was traveling on a one-way ticket for a private sleeper car, and his ticket had been purchased just before departure with a credit card issued to another person. The agents searched Valdes‘s luggage and found four bundles of cash totaling $239,400. Each bundle had been covered with several layers of packaging: innermost was a layer of plastic wrap, then tin foil, and then rubber bands to hold each bundlе together. Finally, each bundle was wrapped in a brown paper bag.
Valdes told the DEA agents that the money was his and that he had packed it that way. He told them he was traveling to California to purchase computers for his
The DEA agents did not arrest Valdes. They told him that he was free to go but seized the currency for further investigation. Valdes provided his personal identification and contact information to the agents. They gave him a receipt for the seized currency.
The government then filed a civil forfeiture complaint against the currency pursuant to
After Valdes and Brown filed their claims to the property but before they filed their answers to the complaint, the gоvernment served special interrogatories under Rule G(6). Rule G is a supplement to the Federal Rules of Civil Procedure that applies to in rem actions like this forfeiture case. Rule G(6)(a) permits the government to “serve special interrogatories limited to the claimant‘s identity and relationship to the defendant property without the court‘s leave at any time after the claim is filed.” The claimants provided limited responses to the interrogatories. Valdes asserted that he is the owner of the defendant currency and that it was in his possession when it was seized. The claimants also objected to the scope of the interrogatories.
Ultimately the government moved to strike both sets of claims and answers, arguing that the claimants failed to respond to the interrogatories, see Rule G(8)(c)(i)(A), and that they lacked standing, see Rule G(8)(c)(i)(B). The government also moved for summary judgment pursuаnt to
II. Analysis
The issue at the heart of this appeal is the boundary between standing, Article III or otherwise, and the merits in a civil forfeiture proceeding. Bеfore the district court the government argued that Valdes and Brown lack standing to pursue their claims under Article III of the Constitu-
Rule G(8)(c)(ii)(B) states that a claimant bears the “burden of establishing standing by a preponderance of the evidence.” At the pleading stage a plaintiff need only allege, not prove, facts establishing standing. United States v. $196,969 U.S. Currency, 719 F.3d 644, 646 (7th Cir. 2013), citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561-62 (1992). Beyond the pleading stage, standing must be supported “with the manner and degree of evidence required at the successive stages of the litigation.” Lujan, 504 U.S. at 561. These principles are accepted by all parties here. The disagreement concerns “the manner and degree of evidence required” for a claimant to establish standing at the summary judgment stage. We review de novo the district court‘s answer to this legal question. See United States v. 5 S 351 Tuthill Rd., Naperville, Ill., 233 F.3d 1017, 1021 (7th Cir. 2000).
We have not addressed this precise question before, but other circuits have. The Tenth Circuit, for example, has summarized the prevailing view:
As we view it, the government cannot prevent every person unwilling to completely explain his relationship to property that he claims to own, and that is found in his possession and control, from merely contesting a forfeiture of that property in court. It may well be that forfeiture ultimately will prove appropriate, but we find it obvious that such a claimant risks injury within the meaning of Article III and thus may have his day in court.
United States v. $148,840 in U.S. Currency, 521 F.3d 1268, 1276 (10th Cir. 2008) (reversing summary judgment for government in civil forfeiture action); see also United States v. $133,420 in U.S. Currency, 672 F.3d 629, 640 (9th Cir. 2012) (an “assertion of ownership, combined with ... possession of the currency at the time it was seized, would be enough to establish ... standing for purposes of a motion for summary judgment“).2
We agree with these decisions and hold that an assertion of ownership combined with some evidence of ownership is
A. Article III Standing
The “irreducible constitutional minimum of standing” under Article III consists of three elements. Lujan, 504 U.S. at 560. First, the plaintiff must have suffered an injury in fact, an invasion of a legally protected interest that is (a) concrete and particularized, and (b) actual or imminent, rather than conjectural or hypothetical. Second, there must be a causal connection between the injury and the challenged action of the defendant. Third, it must be likely, as opposed to merely speculative, that the injury would be redressed by a favorable decision. Id. at 560-61.
“In response to a summary judgment motion” the plaintiff “must ‘set forth’ by affidavit or other evidеnce ‘specific facts,’ which for purposes of the summary judgment motion will be taken to be true.” Id. at 561 quoting
B. Rule G and “Statutory Standing”
The government argues that Article III standing is not sufficient, though, because Rule G requires more than Article III standing, and in particular it requires a claimant to establish that his or her claim to the defendant property is “legitimate” in order to show standing.
It is true that Rule G requires a claimant to comply with certain procedural requirements. See United States v. Real Property Located at 17 Coon Creek Rd., Hawkins Bar California, 787 F.3d 968, 973-74 (9th Cir. 2015). Many courts have referred to these procedural requirements as “‘statutory standing’ and have held that it is established through compliance with Rule G.” Id.
The main procedural requirements imposed by Rule G are that “the claimant must show that he has filed a timely claim and answer, that the claim is properly verified, and that he has identified himself and alleged an interest in the property.” Stefan D. Cassella, Asset Forfeiture Law in the United States § 9-4, 326-27 (2d ed. 2013) (footnotes omitted). The prevailing view is that such procedural requirements are the only unique requirements imposed by Rule G. See id. at 326 (“Most courts hold that to establish statutory standing the claimant simply has to show that he has satisfied all of the pleading requirements in § 983(a)(4) and Rule G(5).“). We agree and hold that satisfying procedural requirements—not demonstrating “legitimate” ownership—is all that Rule G asks of claimants aside from showing сonstitutional standing.
In both $574,840 and $196,969 we reversed judgments of forfeiture. Both cases recognized that Rule G requires more of claimants than mere compliance with Article III. See $574,840, 719 F.3d at 651 (“Rule G(5) requires more, but the more is an addition to what is required to plead Article III standing.“); $196,969, 719 F.3d at 646 (“The government has confused the requirement of pleading Article III standing ... with the additional requirements imposed on claimants in civil forfeiture proceedings by Rule G(5).“). But those cases are also clear on two points that, taken together, foreclose the government‘s interpretation of them.
First, pleading Article III standing in a civil forfeiture action “requires no more than alleging that the government should be ordered to turn over to the claimant money” held by it that belongs to him. $196,969, 719 F.3d at 646. Second, the “more” that Rule G requires beyond compliance with Article III is, as noted above, compliance with the simple procedural requirements listed in Rule G(5). Id. at 645-46. A claim must be “signed under penalty of perjury.” Id. at 645. It must be “served on the government.” Id. at 646. It must “identify the specific property claimed” and “the claimant.” Id., quoting Rule G(5)(a)(i)(A)-(B). The last relevant requirement of Rule G(5), and the one at issue in $196,969, was that the claimant must state what interest he or she has in the property. Id.
In $196,969 the district court had held that to comply with that last requirement of Rule G(5), a claimant must state “how he obtained possession of the currency, including, but not limited to, the person(s) from whom he received the currency, the date of receipt, the place of the receipt, and a description of the transaction which generated the currency.” Id. We rejected that view. We said that a “bald assertion of interest ... would strictly сomply with” Rule G(5). Id. And we explained that no “additional requirements can be extracted from the terse and crystalline language of the subdivision on which the government and the district court place their entire reliance.” Id. at 647. There is no basis in our precedents for the view that Rule G requires a claimant to demonstrate “legitimate” ownership of the defendant property to show standing.
The government also presents a policy argument for its interpretation of Rule G. It argues that requiring claimants to demonstrate legitimate ownership will discourage frivolous claims. We assume this is true, but we explained in $196,969 that this policy concern is not a sufficient reason for us to force claimants to “spell out” their claims under Rule G. Id., 719 F.3d at 647 (“This is an argument for amending the rule, which does not require ‘spelling out,’ rather than for judicial elaboration of it.“). Our limited approach in $196,969 is similar to that adopted by the Supreme Court in a recent case about “statutory standing.” “Just as a court cannot apply its independent policy judgment to recognize a cause of action that Congress has denied, it cannot limit a cause of action that Congress has created merely because ‘prudence’ dictates.” Lexmark Int‘l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 128 (2014) (citation omitted).
This is not a case where a claimant asserts ownership of a painting stolen from the National Gallery in Washington. See $574,840, 719 F.3d at 653. Nor is it a case, to take a more serious concern mentioned in the cases, where a claimant generated frivolous claims by reading published forfeiture notices. See id.; Cassella, Asset Forfeiture Law § 9–4, 325. Valdes was in possession of the money when it was seized, and he claims ownership. Our holding, that an assertion of ownership combined with evidence that the claimant was in possеssion of currency when it was seized is sufficient to establish standing at the summary judgment stage of a civil forfeiture action, will not open the floodgates to frivolous claims.3
The Supreme Court recently clarified and narrowed standing doctrine. In Lexmark, the Court reminded us that federal courts have a “virtually unflagging” obligation to decide cases within their Article III jurisdiction. 134 S.Ct. at 1386, quoting Sprint Communications, Inc. v. Jacobs, 571 U.S. 69, 77 (2013). The Court also cautioned that labels like “prudential standing” and “statutory standing” are misleading and should be аvoided. Id. at 1387 n. 4. Rather than relying on these supposed standing concepts that are not rooted in Article III, we should ask whether Valdes falls within the class of people whom Congress has authorized to contest a forfeiture under Rule G. See id. at 1387. The answer is yes.
Apart from Rule G‘s textual silence on any requirement to prove “legitimate” ownership, the most compelling reason to reject such a requirement as part of the Rule G standing inquiry is that it would undermine the statutes governing civil forfeiture. The Civil Asset Forfeiture Reform Act of 2000 (CAFRA) placed the burden on the government to prove by a preponderance of evidence that property is forfeitable.
If we were to read Rule G to require a claimant to demonstrate “legitimate” ownership, we would thus nullify a central reform of CAFRA. Putting the pieces together from the previous two paragraphs makes this easy to see. The government insists that demonstrating legitimate ownership is an indispensable part of a claimant “establishing standing by a preponderance of the evidence.” Rule G(8)(c)(ii)(B). Demonstrating legitimate ownership, though, is tantamount to demonstrating that “property is not subject to forfeiture.” $125,938.62, 537 F.3d at 1293. Any time the government moves for summary judgment on standing in a civil forfeiture action, then, the claimant would have to “carry the burden” of establishing by a preponderance of the evidence that his property is not subject to forfeiture. That would effectively shift the burden of proof from the government back to the claimant, contrary to
Such erroneous melding of standing and the merits in civil forfeiture actions would undermine other legal protections for claimants, as well. Claimants would be deprived of their right to a jury trial under Rule G(9). See generally United States v. One 1976 Mercedes Benz 280S, Serial No. 11602012072193, 618 F.2d 453, 466 (7th Cir. 1980) (“The conclusion appears inescapable that both English and American practice prior to 1791 definitely recognized jury trial of in rem actions at common law as the established mode of determining the propriety of statutory forfeitures on land for breach of statutory prohibitions.“). Standing is decided by judges rather than juries. If deciding standing meant deciding “legitimate” ownership, then judges would functionally be deciding forfeitability, as discussed above. Further, if claimants obtain discovery it would often be only by the grace of the government. The government would rarely be put to its proof in a civil forfeiture аction unless it elected not to file a summary judgment motion challenging standing, and it would be the rare case indeed where a claimant could convince a district court that he needed discovery to establish his own standing.
The procedural framework for civil forfeiture actions makes it particularly important that standing serve a “truly threshold” function in these cases. See United States v. $557,933.89, More or Less, in U.S. Funds, 287 F.3d 66, 79 (2d Cir. 2002) (Sotomayor, J.). To the extent there is overlap between a tort рlaintiff proving causation as an element of his cause of action and proving causation as an element of his standing to pursue that cause of action in federal court, we know that the “plaintiff bears the burden of proof” as to both and must produce “the manner and degree of evidence required at the successive stages of the litigation.” Id., quoting Lujan, 504 U.S. at 561. “It must be remembered, however, that in a civil forfeiture action the government is the plaintiff, and it is the government‘s
Claimants Valdes and Brown have established standing to assert their claims to the defendant currency. The claimants were not required to show that their claims are “legitimate.” That is a merits question, and presumably one for a jury to decide. The judgment of the district court is REVERSED and the case is REMANDED for proceedings consistent with this opinion.
DAVID F. HAMILTON
UNITED STATES CIRCUIT JUDGE