U.S. v. $22,050.00 U.S. Currency

• Citation: 595 F.3d 318
• Decision Date: 16 February 2010
• Docket Number: No. 08-6335.,08-6335.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. $22,050.00 UNITED STATES CURRENCY, Defendant, James Christopher Rowland, Claimant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

595 F.3d 318

UNITED STATES of America, Plaintiff-Appellee, v. $22,050.00 UNITED STATES CURRENCY, Defendant, James Christopher Rowland, Claimant-Appellant.

No. 08-6335.

United States Court of Appeals, Sixth Circuit.

Submitted: November 19, 2009.

Decided and Filed: February 16, 2010.

ON BRIEF: Peter J. Strianse, Tune, Entrekin & White, P.C., Nashville, Tennessee, for Appellant. Debra Teufel Phillips, Assistant United States Attorney, Nashville, Tennessee, for Appellee.

Before: MARTIN, BOGGS, and COLE, Circuit Judges.

OPINION

BOYCE F. MARTIN, JR., Circuit Judge.

In connection with a drug distribution and money laundering investigation, the United States Drug Enforcement Administration seized, among other things, $22,050 in United States Currency from the office of Rowland Development FLP in Murfreesboro, Tennessee. Claimant James Rowland ran this company. Rowland filed with the DEA an administrative claim to the seized objects, and the DEA eventually returned all of the items except the $22,050. Instead of returning the money, the DEA referred the matter to the United States Attorney for the Middle District of Tennessee, who filed an in rem forfeiture action against the money.

Because Rowland was a known potential claimant to the money, the government properly provided him notice of the action via certified mail. However, Rowland swears that he never received the notice because his secretary did not give it to him. Rowland did not timely file a verified claim to the funds and did not otherwise timely appear or respond in the civil action. Five months after filing the action, and four months after the deadline to respond, the government sought default against the money, which the Clerk entered.

Apparently Rowland did receive a copy of the government's motion for default. On the same day that he received the copy of the motion, before entry of an actual default judgment, Rowland moved pursuant to Federal Rule of Civil Procedure 55(c) to set aside the default and also filed a verified claim and answer to the forfeiture action. The government thereafter moved to strike Rowland's verified claim as untimely. Incorporating our prior cases requiring "strict compliance" with the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions into the Rule 55(c) analysis and relying heavily upon those cases, the district court denied Rowland's motion to set aside default, granted the government's motion to strike Rowland's late-filed claim, and entered judgment against the $22,050 in favor of the United States.

Rowland now appeals both decisions. Because we believe that the district court incorrectly focused on case law discussing compliance with the Supplemental Rules instead of the Rule 55(c) test for setting aside default in general, we REVERSE and REMAND to the district court.

I.

On September 20, 2007, the DEA executed a search warrant at the office of Rowland Development FLP in connection with a money laundering and controlled substance investigation. The agents seized a Porsche, a Ford sports utility vehicle, $3,482 in cash from one location in the office and another $22,050 in cash from a different location in the office. James Rowland, represented by counsel, timely filed a claim with the DEA asserting an ownership interest in the seized money and cars. As required by the applicable statutes, upon receipt of Rowland's administrative claim, the DEA forwarded the seized money and cars to the United States Attorney's office to decide whether to pursue civil forfeiture. On May 29, 2008, the DEA returned the two cars and the $3,482 to Rowland because the government had declined to seek forfeiture of those items.

However, the DEA did not return the $22,050 because, unbeknownst to Rowland, the government had initiated an in rem forfeiture action approximately three months earlier, on February 21, 2008. The government sent notice of the forfeiture action to Rowland via certified mail to his business, i.e. the place from which the money was seized, on March 10, 2008.¹ The certified mail return receipt indicates that the notice was received and signed for by a Ms. Landry, who is Rowland's secretary. Rowland claims, via sworn affidavit, that he never actually received the notice. Ms. Landry further claims via affidavit that she apparently never opened the envelope from the United States Attorney's office and therefore never gave it to Rowland.

In addition to providing notice directly to Rowland, the government also sent notice of the forfeiture action to Rowland's attorney by regular mail. Rowland's attorney, again via sworn affidavit, claims never to have received the notice.² Although Rowland now claims that the government could have done more to ensure that he received actual notice of the forfeiture action, it is uncontested that the government complied with the applicable rules for providing notice of the forfeiture.

Pursuant to Rule G(5) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions, Rowland had thirty-five days from the date that the government sent Rowland notice of the action via certified mail, March 10, 2008, to file a verified claim to the money as stipulated by the notice. Thus, Rowland's verified claim was due by April 15th. Because he claims to have never received notice of the action, Rowland did not timely file a verified claim.

As stated above, the DEA returned the cars and the $3,482 to Rowland on May 28th, but did not return the $22,050. Several more months passed with, apparently, no action. Then, on August 7th, the government moved under Federal Rule of Civil Procedure 55(a) for entry of default, which the Clerk entered the next day. Importantly, default judgment was not entered until after Rowland had made an appearance, filed a verified claim and answer, and moved to set aside the default.

Rowland received a copy of the motion for default on August 12th and immediately called his attorney. That same day, Rowland moved to set aside the default and also filed a verified claim and answer to the underlying forfeiture action. The motion to set aside default is relatively paltry. It describes the chronology of events leading up to the default and obliquely argues that service of the original notice was inadequate. The motion does not assert that Rowland has meritorious defenses to the forfeiture claim and does not discuss whether the government would be prejudiced by setting aside the default.

However, along with the motion to set aside default, Rowland filed a verified claim to the money in which he swore under penalty of perjury that he had an ownership interest in the money. Rowland also filed an answer to the forfeiture complaint that generally denies the allegations and asserts that Rowland had not violated any drug or money laundering laws. The answer further asserts three affirmative defenses — that the complaint fails to state a claim, that the complaint violates the Eighth Amendment's excessive fines clause, and that the money was the fruit of an illegal search and seizure and thus subject to suppression by Supplemental Rule G(8)(a) — but does not provide any factual allegations to substantiate these defenses. Aside from Rowland's sworn assertion of an ownership interest in the money, Rowland submitted no proof, such as affidavits or documents, in support of his motion or claim.³ Nevertheless, it is undisputed that Rowland's claim and answer comply with all of the requirements of Supplemental Rule G, save, of course, timeliness.

The government responded to the motion to set aside default and also moved to strike Rowland's verified claim for failure to comply with the timing requirements of Supplemental Rule G. The court, primarily focusing on the requirements of Rule G, declined to set aside the default and granted the government's motion to strike. United States v. $22,050.00 United States Currency, No. 3:08-cv-180, 2008 WL 4093066, 2008 U.S. Dist. LEXIS 75702 (M.D.Tenn. Aug. 26, 2008). In its opinion, the court found that the government had satisfied its duty to take adequate steps to provide Rowland with notice of the forfeiture action but made no finding as to whether Rowland or his counsel had actual notice. Citing United States v. Thirty-Five Firearms, 123 Fed.Appx. 204, 206-07 (6th Cir.2005), the court also rejected Rowland's argument that his filing of a claim with the DEA, before the forfeiture action had even been initiated, was sufficient to satisfy the forfeiture claim rules. Finally, the court credited the government's contention that setting aside the default would prejudice the government because it would set a bad precedent.

II.

Rowland appeals the district court's denial of his Rule 55(c) motion to set aside default as well as the grant of the government's Supplemental Rule G motion to strike his verified claim and answer. Both decisions are reviewed for abuse of discretion. Thirty-Five Firearms, 123 Fed. Appx. at 205-06 (Rule G motion to strike claim); O.J. Distrib., Inc. v. Hornell Brewing Co., 340 F.3d 345, 352 (6th Cir.2003) (Rule 55(c) motion to set aside default). Furthermore, the two motions essentially presented the same question to the district court — whether to excuse Rowland's untimely filing of a verified claim and answer. Thus, the appeal of the two decisions also presents the same basic question.

However, our cases discussing the two rules establish materially different standards in determining whether to excuse noncompliance or to adhere strictly to the rules. In general, our cases discussing motions to set aside default under Rule 55(c) are extremely forgiving to the defaulted party and favor a policy of resolving cases on the merits instead of on the basis of procedural missteps. See, e.g., O.J. Distributing, 340 F.3d at 353 (stating that the standard for setting aside a default is less strict than the standard for setting aside a default judgment and that the district court has ...